A report by KPMG early this year showed that the Indian startup ecosystem had increased. The number of startups in India had risen to 50,000 in 2018 as compared to 7,000 in 2008. The increment is due to the growth of the VC industry. As an aspiring business owner, these statistics should serve as an encouragement and should see you make moves towards your startup.
When starting a business, you need to think about the financing options available. Sometimes, you may need more capital than you had anticipated, and the savings you had may not be enough and may need to look for other ways to finance your startup.
Here are a few financing options to consider for your business in India
Talk to your family and friends
As obvious as this seems, before going out to borrow, consider your inner circle. They could be family members or friends. Make this a serious application and have your business plan with you to help them understand how your business will work and how you expect to realize profits. Also, let them know how and when you intend to refund the money.
Most often, family members may have issues loaning you the money, especially because they think you won’t return the money. Have, if possible, a signed agreement with them to show them that you are serious in repaying them.
Look for government schemes
If you are a young entrepreneur who is starting up, you could consider government schemes that offer loans. For example, we have the Pradhan Mantri Mudra, which was launched in 2015 and provides credit to small entrepreneurs. They provide credit worth up to Rs 10 lakh.
You need a business plan, and your business should be a non-farm one to be eligible. The Mudra loan is available in banks, NBFC and MFI or through the Mudra website portal.
Apply for bank loans
Bank loans are another possible option you could consider. For banks, they will need a detail project report which will feature every forecast of your business. This will include your marketing strategy, business projections, how you plan to realize profits, and so on.
One thing about banks is that you need to prove you can repay the loan. For example, every bank in any country wants to make sure you are creditworthy. Sometimes, it may include pulling up credit reports to see if you have ever defaulted before. There may have been an error which would be in your credit report which brings in the need for somebody to help you solve that. You can dispute the errors through the help of https://creditrepaircompanies.com/ and have it rectified.
Look for angel investors
In simple terms, an angel investor is somebody who will provide you with capital but in exchange for ownership equity, which could go up to 30%. They are more like private investors who will invest in your business in its early stages. For you to get such investors, you have to network. Networking has been known to work and create strong business relationships.
Angel investors may also be in a group where they pool their resources to fund businesses. For you to have a chance of getting them, you need to get your business ready. Investors will often work with companies that show a great future and have a great team. Convince them to invest in your business by having a great pitch.
Research on where you can get angel investors in India for your financing needs. They may have a website, and you can see what they are looking for and decide if you’ll pitch to them or not.
Consider venture capital
Venture capital (VC) is usually funds that are professionally managed and invest in companies that show a huge potential for growth and success. VCs will often invest in your business in exchange for equity. They exit when there is an acquisition or an IPO.
VC is an excellent option for businesses that can not access bank loans and have had a limited operating system.
What you get as a business when you go for VC is not only the funds, but you also get to benefit from strategic advice concerning your business model and marketing strategies.
Be on the lookout because VCs will mostly want a business where they will recover their funds in 3-5 years. So, if your product will take longer than that to realize profits, it may not be a good option for you. You also need to be flexible enough because you might have to give up some of your business control. If you are not somebody who is looking into getting mentorship or compromising, this may not be an excellent option for your startup.
Starting your business should be an exciting opportunity for you. However, you need to find financing options that are in favor of your business. Don’t get options where you may have to give up your company because you owe somebody money.