Tips on How to Raise Funds to Grow Your Business in India
Sep 20, 2021
Are you planning to launch your start-up, or have you come up with a new business idea that you want to convert into a reality? We all know that the first and foremost requirement of starting any business is arranging funds. It is the only way of giving a definite vision to the business idea. Fundraising and funding are needed and necessary for start-ups.
The first round of funding in the start-up is known as the seed funding series. It is pronounced as series A, B, and C. A start-up first a fall needs to work on to make way for getting seed funding. Here are some tips on how to get a business loan in India:
How to Get Funding for Start-up in India
One of the ways of getting small business funding is crowdfunding. It works in similar ways as mutual funds work. Here, multiple investors are involved in your start-up. The investor offers the start-up a fixed amount of investment after evaluating the factors like the business idea, prospects, objectives, profit ratio, and understanding the plan of action. When it comes to arranging funds for the start-up, the crowdfunding technique is topping the charts. It is the easiest way to connect with experienced players and make them believe in your business idea. It is one of the easiest ways of the crucial fund in the starting phase of the business. Investors in crowdfunding could be your friends, family, or experienced entrepreneurs.
If the surplus funds are lying idle in your bank accounts, you can go for self-funding also to make your business idea a reality. This process is also known as bootstrapping. It works well for those start-ups who are struggling hard but are not able to convince any of the investors to give funding. To convince those investors and make them believe in your idea, you can self-fund and show the feasibility. Bootstrapping is one of the easiest ways to start any business. Initially, the business requirements are less, so with fewer funds also, one can start the business.
All the individuals who have surplus cash in their bank accounts are looking to invest in start-ups are known as angel investors. These investors are self-own or maybe working in groups to find such start-ups that have huge potential. Angel investors invest money with an expectation of getting high interest rates on the investment made, i.e., up to 30% equity. Some of the most prominent examples of angel investments are Google, Yahoo, and Alibaba.
Connect with Venture Capitalist
It is the best place for that business that is looking forward to big bets. The venture capitalist is the professional who will help you find the right investment opportunities for the business after doing proper background checks. They hold expertise in raising funds for businesses with a strong team and enough traction. Venture capitalists mainly prefer those businesses that are into equity and the business already listed in the IPO.
Use Credit Cards for Raising Funds for Business
Any start-up owner may also use credit cards to arrange funds for running the smooth operation of the business. It is one of the easiest ways of getting funding for small businesses. All that is required is knowing ways to use the credit card. If you miss a payment of credit card bills, you will have to pay an additional interest amount along with the principal amount. It is also known as a line of credit loan.
Apply for Working Capital Loans
For start-ups and small businesses, it is also one of the safest ways of arranging funds to meet the business expenses and for the smooth running of the daily business operations. Working capital loan proves to be the most resourceful option. The business funding is granted after charging the interest rates of half to one year. The interest of business funds varies between 12-16% based on the creditworthiness and risk factor associated with the business idea.
Go with the Option of Start-up Incubator
A business incubator is an organization that is known for helping start-up companies in setting up their business. They offer services like providing office space, creating strong networking, and management training. They are mainly dedicated to providing help to early-stage and start-up companies. You can search about many business incubators available online.
Term Loans for Business
Term loans are long-term business loans online. It is usually fulfilled to meet the capital expenditures of the business. The tenure of the term loan ranges between 15 years to 20 years. An entrepreneur can go with this option also if looking for funding to expand the business at a grand level. Term loans for businesses are given both at fixed and variable business loan interest rates. FlexiLoans provides terms loans which are unsecured business loans.
Equipment and Invoice Loans
The equipment loans work well for those businesses looking for arranging funds for the smooth running of the manufacturing area of the business. Under the equipment loans, one can get funding ranging from 25 crores to 100 crores. The loan amount eligibility varies from one financial institution to another. The duration of these loans ranges from 4 to 5 years and are available at affordable interest rates.
Invoice loans are being provided up to 80% of the invoice amount. The invoice loan is being granted after charging a processing fee of a small amount. The best part about taking invoice loans is that it is available at a low-interest rate.
Government Schemes for Raising Funds in Business
The Government of India has launched many MSME loan schemes to help businesses raise funds easily. Designed for micro, small, and medium enterprises, these loans are offered by cooperative banks, commercial banks, NBFCs, RRBs, etc. Among the most popular government schemes, Pradhan Mantri Mudra Yojana is one of the most popular and most applied MSME business loans.
- Shishu Loan: Business loan eligibility is up to Rs 50,000
- Kishore Loan: Loan amount eligibility varies up to Rs 5 Lakhs
- Tarun Loan: Loan amount eligibility varies up to Rs 10 Lakhs
The main reasons for which one can apply for Pradhan Mantri Mudra Yojana are meeting the working capital requirements, buying of plant and equipment, Machinery, etc.
Raise Funding by Winning Contests
Winning contests is also one of the ways of raising funding for loans for a new business. The contest works as encouragement for all those start-ups who are struggling hard to get some investors. Winning such competitions would be a great way of proving the feasibility of the business. These competitions are mainly associated with building up a product and presenting your business idea to experienced entrepreneurs. To win this competition, one has to make sure that the project stands out from other contestants. You need to present the unique value proposition of your business to create a solid and positive impression of yours in the mind of entrepreneurs.
Take the Help of a Start-up Accelerator
The start-up accelerators are working similarly to the start-up incubator. It works as the best solution for all those entrepreneurs who have newly entered the business world. The start-up accelerators acquire some stake of the company, like 5 to 25% of equity. In exchange for the equity, they are investing in the company. The duration for which a start-up accelerator takes the stake varies from few weeks to months.
Use NBFCs Loans
Non-banking financial institutions are one of the great ways of applying for online business loans. It works well for all those micro-businesses who are not having access to getting a conventional loan. The best part about taking the help of FlexiLoans to apply for a business loan is its minimal eligibility and an easy application process.
If you are looking forward to growing your start-up at a faster pace? You have to look out for outside sources of arranging funds. A start-up cannot survive long without getting series funding. It will become difficult for you to explore the market opportunities. Keep your focus on getting a series funding also. The best way of raising funds for the business is to look for good and reliable corporate governance. You may also take the help of good accounting software to analyze the exact fund requirement.
Money is the main bloodline of any business. Arranging funds at the initial level is not at all an easy journey. But once you get it, it means you get the fuel to start the business. How much funding you will get for a business is dependent on the nature and risk factors associated with the business. Before approaching any investors, always understand the entrepreneurship ecosystem.