Ways to Get Money to Start Your Business: Smart Financial Solutions

Every discussion about starting or running a business boils down to the money you have and need. Whether you are just starting a business or expanding it, you need money to buy inventory, pay vendors, cover salaries, pay bills, and more. 29% of startups in India fail simply because they don’t have enough money. The good news is you have access to different ways to get money for business.

Without money, it becomes difficult to cover even the basic business needs. Having just the right amount of money, in contrast, helps you fund all your business operations. If you want to know how to get money to start your business, you must know the different business funding options available. Explore different ways to get money for business and funding options for business start-ups.

Why Funding is Essential for a Successful Business Start-Up?

A business usually needs money for expansion, working capital and buying or replacing assets like land, offices, and machinery. The importance of business funding for start-ups, however, differs here as start-ups need funding for product development, market entry and rapid growth. Another reason why businesses need funding is because start-ups have no revenue or profits in the early stages.

A significant 82% of startup founders in India face challenges due to inadequate funds and financial planning. This leads to operational chaos and increases failure rates. Money not only helps you address it but also finances business operations easily.

Why is Funding Essential?

• Product Development: Funding ensures you have the time and money for product research, development, and testing. Whether you’re creating a physical product or a tech product, funds ensure your development goes smoothly.
• Covers Daily Operations: Funding is important for start-ups to cover daily operational expenses like rent, electricity costs, inventory, and equipment. When you have funds, you don’t have to worry about the daily operational expenses.
• Growth: Securing capital for startups is important for both growth and expansion. This funding helps you scale, expand your business, increase your team headcount, launch another product or open to new locations.
• Safety & Assurance: A business is always prone to unexpected challenges , including market downturns and poor performance. As a business owner or startup founder, business funding helps you navigate through developments and emergencies.

Insufficient funds at any stage of a business can be a disaster. Your business can fail to compete, deliver products/services, or, worst, shut down. It is essential to have a supply of emergency funds.

Traditional Ways to Get Money to Start Your Business

There are different traditional ways to get money for business, and they are still accessible. The most popular business funding options are debt, equity or startup financing solutions. Among these ways, start-up owners also turn to family and friends for business financing. If you are thinking about how to get money to start your business, here are the traditional business funding options you know:

1. Bank Loans

There are various banks that offer loans to startups or businesses. It is a quick and easy way to secure funds when needed. Banks charge interest depending on the loan and risk. Bank loans also involve additional charges.

Bank	Loan Amount	Rate of Interest	Tenure
State Bank of India	Up to ₹50 crores	9.8% onwards	Up to 15 years
HDFC Bank	Up to ₹50 lakh	11% – 21% p.a.	Up to 5 years
ICICI Bank	Up to ₹2 crore	12% – 17% p.a.	Up to 7 years
Punjab National Bank (PNB)	Up to ₹1 crore	8.25% – 12% p.a.	Up to 7 years
Bank of Baroda (BoB)	Up to ₹5 crore	9% – 12% p.a.	Up to 7 years

Advantages of a Bank Loan

• You can get funds without giving up equity in your business.
• If you repay your loans on time, you can improve your business credit score.
• Bank loans are suitable for medium and long-term borrowings.

Disadvantages of a Bank Loan

• Early repayment of the loan may incur additional charges.
• If your business fails to repay the loan, banks can take action and seize your assets.
• Defaults in loan payments can negatively impact your credit score. 

2. Venture Capital

Venture Capital, or VC, is a type of financing provided to small businesses or startups. VC firms invest capital in businesses they see with growth potential. The funding usually comes in the form of private equity. 

VC firms help by providing funds, technical expertise, and managerial experience. They usually provide funds to startups or small companies that have a new idea or a revolutionary product with huge growth potential.

To attract a Venture Capital fund to invest in your product/business/idea, identify potential investors who have previously invested in similar companies. Prepare a pitch deck and develop a strong business plan. When you have a good understanding of your market and have built a good team, you can reach out to VC firms.

3. Angel Investors

Angel Investors are high-net individuals who invest funds in a company in exchange for equity or ownership. They also provide industry connections and strategic advice, and benefit from the success of the company. Angel Investors and Venture Capital have become popular for businesses to raise funds. Both provide capital but differ in their approach.

Angel Investors are high-net-worth individuals (HNIs) who invest their own money and provide guidance to early-stage startups. A VC firm has a pool of investors and analysts to examine and identify potential investments.

4. Business Grants

A business grant is a source of funds for companies given by government agencies or private organisations. The government offers various schemes for startups to support them financially by providing them with grants. Several schemes include the Startup India Seed Fund, Pradhan Mantri Mudra Yojana, and Atal Innovation Mission.

Several states have their own initiatives, like the StartInUP policy in Uttar Pradesh and the Kerala Startup Mission(KSUM) in Kerala. Private grants include equity financing through angel investors, venture capitalists, business incubators, and accelerators.

Alternative Financing Options for Entrepreneurs

In India, almost 70% of MSMEs struggle with a lack of operating capital. This is where they turn to banks and lenders, but they have strict business loan eligibility criteria. Today, entrepreneurs have access to multiple alternative business funding options. These options are usually faster and sometimes more accessible than traditional ways to get money for business.

1. Crowdfunding

Crowdfunding for startups is a new and alternative way to raise funds for your business. You can raise funds by showcasing your product or company via online platforms. These platforms supercharge your business by allowing a huge online community to fund your ideas. Using these platforms, you can build a community of supporters and gain access to new customers.

2. Peer-to-Peer Lending (P2P)

In P2P lending, lenders connect directly with borrowers. Faircent is India’s first RBI-registered Peer-to-Peer lending platform. It is a marketplace for borrowers and lenders to connect. It is a quick and easy way to arrange funds for your business. However, since no financial institution handles these loans, they carry higher interest rates and risks.

3. Microfinance Institutions

Microfinance Institutions (MFIs) are financial organization’s that provide small business loans, microloans and other financial products. These institutions provide access to small loans to the low-income population, fostering economic growth. They provide microloans, micro savings, and microinsurance to small businesses or MSMEs.

4. Grants and Competitions

Another modern method to raise funds for your business is to apply for various government and private grants. You can also apply for competitions. They offer valuable funding and networking opportunities for business owners. 

How to Leverage Personal Assets to Fund Your Business?

If you don’t want to apply for start-up loans, you can also make use of personal assets for business funding. The key benefit of funding your business with savings, for example, is that you are not giving away your equity. Here are the best ways to fund your business with personal assets:

1. Personal Savings

Funding your business with savings is the best and easiest way to meet your business demands. The added advantage is that you maintain full control and ownership of your business. However, putting your capital can be risky. Keep an emergency fund ready for unpredictable situations.

2. Home Equity Loans

If you own a home or property, you can borrow money against the property. You can secure funds by borrowing against your assets. Another benefit of using home equity for business is that you get a lower interest rate. However, any default in repayment can cost you your home.

3. Retirement Funds

Retirement Funds, or PPF (Public Provident Fund), is a popular scheme offered by the government. PPF offers stable and high returns, and you also have easy access to it. You, as a business owner, can use your retirement savings to fund your business.

4. Family and Friends

Many businesses still struggle to get business financing because of the strict eligibility criteria and lack of assets. This is why business owners turn to their friends and family to get money for their business. However, it is essential to sign a Memorandum of Understanding while taking the loan to avoid any future misunderstandings.

Government Schemes and Subsidies for Startups in India

MSMEs employ over 11 crore people in India and account for 30% of GDP. However, there is still a $530 billion credit gap in India. This is why the government offers many funding options for business start-ups. These government funding schemes for startups in India are also popular among startups for their benefits and accessibility.

Our government has taken many initiatives and launched multiple schemes for startups and business subsidies India. These initiatives support new and small businesses.

1. Startup India

Startup India Seed Fund Scheme (SISFS) provides financing to startups for proof of idea, concept, prototype development, product trials, market-entry, and commercialization. The objective of this scheme is to offer funds to promising cases that can have a multiplier effect in validating the business ideas of many startups, leading to employment generation. You can check the application process, eligibility criteria, and benefits here.

2. Atal Innovation Mission

NITI Aayog launched the Atal Innovation Mission (AIM) to promote entrepreneurship. It is a flagship initiative of the government of India. It was set up in 2016 to promote a culture of entrepreneurship & innovation in India. You can learn more about the initiative here.

3. Pradhan Mantri Mudra Yojana

The Hon’ble Prime Minister launched the Pradhan Mantri Mudra Yojana (PMMY) on April 8, 2015. The scheme aims to provide loans of up to ₹20 lakhs to the non-corporate, non-farm small and micro enterprises.

The government classified these loans as Mudra Loans under the PMMY scheme. Small Finance Banks, NBFCs, and Commercial banks sanctioned the loans. To apply for PMMY, you can visit this portal.

Shishu	Up to ₹50,000
Kishore	₹50,000 – ₹5 lakh
Tarun	₹5 lakh – ₹10 lakh
TarunPlus	₹10 lakh – 20 lakh

Indian Startup Schemes Supporting Startups & MSMEs

Parameter	Startup India	Atal Innovation Mission (AIM)	Pradhan Mantri Mudra Yojana (PMMY)
Launched In	2016	2016	2015
Implemented By	DPIIT (Department for Promotion of Industry and Internal Trade)	NITI Aayog	Ministry of Finance (via SIDBI and Banks)
Target Group	Startups and early-stage entrepreneurs	Innovators, students, startups, incubators	Micro and small businesses, non-corporate sectors
Objective	Promote innovation, ease of business, and funding support	Foster a culture of innovation and entrepreneurship	Provide collateral-free micro-credit to small businesses

How to Pitch Your Business Idea to Investors and Lenders?

To secure funding for your business, you need to pitch your idea well to investors or lenders. You, as an entrepreneur, need to convince investors to invest in your product or service. You will successfully achieve your objective by knowing how to pitch to investors. A great pitch comprises a few elements:

• Understanding of the Idea
• Understanding of the target audience
• Growth strategy and product market fit
• Good business model

Keep your pitch concise and straight to the point. Avoid vague financials and focus on your idea and how you and your team can win in this market. Craft a story highlighting all the essential details of your company and product.

You must show a clear roadmap detailing how and where you will allocate the funds. Give a convincing reason to investors to invest in your idea and company. But remember, don’t oversell or overpromise.

Understanding Business Loans: What You Need to Know

There are different types of business loans that business owners can avail, including:

• Working Capital Loan: You can opt for a working capital loan for business expansion, procurement of raw materials, team expansion, etc. These are mainly short-term loans with a maximum limit of up to ₹40 lakhs.
• Term Loan: You repay a term loan over a set period. It is categorised into short-term (12 months) and long-term (5 years). You can get a collateral-free loan of up to ₹2 crore.
• Credit Guarantee Fund Trust for Micro & Small Enterprises: In 2000, the Ministry for MSMEs launched the CGTMSE scheme. It provides a line of credit to the MSE segment without the hassle of collateral. 

How to Maintain Cash Flow and Financial Health After Securing Funds?

For every business, raising capital is a significant first step, but sustaining cash flow and guaranteeing long-term financial stability are the true obstacles. Good cash flow management is essential for long-term development as well as survival.  Even well-funded businesses encounter difficulties very rapidly if they do not have a sound financial plan. The following are some essential tips for preserving cash flow and financial stability after funding:

• Track All Your Expenses: Utilise software or financial tools to track and classify spending. This guarantees openness and pinpoints areas where expenses might be reduced.
• Minimise Debt: Reduce your exposure to debt by avoiding taking out high-interest loans and, if feasible, restructuring your current debts to strengthen your financial position.
• Track Profitability: Evaluate profit margins, burn rate, and runway on a regular basis to keep in line with financial objectives.
• Build a Financial Buffer: Create a financial buffer by allocating a part of the business funding as emergency reserves to be ready for unforeseen difficulties or changes in the market.
• Forecast Financial Flow: Create both short- and long-term cash flow estimates to foresee financing deficits.
• Spend Strategically: Make strategic expenditure a top priority. Rather than focusing just on overhead, invest in growth-promoting initiatives like marketing and customer acquisition.

Risks and Challenges in Securing Funding for Your Startup

Securing funding has its risks and challenges. To fuel your business growth, address all those risks effectively.

• Lack of Market Validation: Many startups jump into development without confirming if real demand exists. This leads to great products that no one wants.
• Insufficient Cash Flow: Early-stage startups often burn cash quickly, underestimating expenses and overestimating revenue.
• Unclear Business Model: Without a clear way to make money, even a great product can feel like a risky bet.
• Inexperienced Teams: Founders often lack well-rounded teams that don’t have skills in business and finance, operations, or growth strategy.
• Regulatory and Legal Risks: Many ignore or misunderstand compliance, IP rights, and industry-specific laws.

You can reduce risks by the following methods:

• Craft a Compelling Pitch Deck: Cover the essentials: Problem, Solution, Market, Business Model, Traction, Team, Financials, and Funding. Ask.
• Show Early Traction: Small wins like beta users, pre-orders, or pilot projects can prove real-world interest.
• Know Your Numbers: Even if you’re pre-revenue, understand your costs, runway, and what the funding will achieve.
• Tap the Right Networks: Warm introductions and founder communities increase credibility and access.
• Be Coachable and Transparent: Don’t fake answers. Be honest about what you know — and what you’re still learning.
• Target the Right Investors: Don’t pitch everyone. Research investors who are interested in your stage and sector.

Conclusion

82% of businesses that fail in India cite inadequate cash flow management as one of the top five business issues. The root of this failure always lies in the amount of money you have, the need and the gap between them. This scale of businesses that fail because of lack of money necessitates having enough money and using it strategically.

If you don’t have the cash with you, the best way is to get a business loan from FlexiLoans. The money not only helps you improve your cash flow but also achieves business objectives. FlexiLoans also offer flexible repayment options and low interest to make repayment easier without affecting your cash flow.