Money is the bloodline of business and funds are like the vein. However, lack of funds is one of the common reasons for the downfall of any business. This long meticulous yet thrilling journey from the idea to revenue-generating business needs a fuel named “Capital”. Therefore, at every stage of the business cycle, entrepreneurs ask one major question- “How to Finance business” However, the answer remains the same, where to find it?
In this blog, we will share 10 ways to raise funds for startups in India.
Ways to Raise Funds for Startups in India:
- Bootstrapping:
Bootstrapping, also known as “Self-funding” is considered to be one of the risk-free ways to kickstart any business. The initial problem for any business is arranging funds while some arrange it from their savings or take it from daily. This step will grant complete control to the founders and could limit the growth of the business.
- Crowdfunding:
Crowdfunding is one of the easiest and newest methods to collect funds from multiple investors through social media sites or web-based platforms. These funds are raised for various purposes like social causes, charities, ideas, disaster relief, events and more. This idea of raising funds for business promotes social and cultural causes.
- Business Incubator:
Business Incubators are the early-stage option for raising funds for business. They are like the parents of the business that nurture it by providing shelter tools, training and networking businesses. Helping to assist nurtures a business to walk, this program normally runs for 4-8 hours and requires a time commitment for business owners.
- Venture Capitalists:
VCs (Venture Capitalists) play a pivotal role in an organization's ecosystem. They fund early-stage companies with high growth potential and better success. Drawn to make clear and ambitious long-term goals, resilient business model, demonstrating a robust and making strong and competent team, VCS invested in startups expects to secure high returns in future.
Note: VCs avoid investing in a startup’s initial or later stages when the competition is igh in business.
- Peer-to-Peer Lending:
Peer-to-peer lending is a form of money borrowing with no intermediate involved in the process. In this, the lenders lend money to borrowers for their investment purposes and borrowers get money at their disposal to invest in the business. This way, the lenders earn from the borrowers because the interest rate is higher as compared to banks, NBFCS and MFIs.
This lending is regulated by RBI to avoid miscommunication between borrowers and lenders.
- Strategic partnerships:
Partnerships with the companies can benefits to infuse funds and resources for startups. They open up the door to new markets and technologies, however, aligning a goal and maintaining a balance between partners can be challenging and also require careful negotiation.
- Credit Cards:
Credit cards are the easiest source of raising funds in business. Easily available after completing few steps, this card can be a course of quick money. However, interest rates and costs on the cards increase quickly and carrying that debt can be detrimental to a business owner’s credit.
- Angel Investor:
Angel investors are individuals who have surplus cash and are interested in investing in new start-ups in India & worldwide. However, the risk involved in this is more as compared to loans offered by financial institutions. These investors invest higher returns for profit.
- Business Loan (Private/Public Sector):
Banks are considered to be the source of raising funds for start-up enterprises with reliability and better conveniences of getting good amounts. They provide funds to the business in two forms, loan and working capital loan. The majority of the banks offer loans to both public and private sectors, however, they vary in interest rates, loan payment, repayment tenure and more.
- Government Loan Schemes:
The government launches various schemes to help start-ups, SMEs, and MSMEs as well as promote the socio-economic growth of rural India, women entrepreneurs, educated youth, individuals from SC/ST category and more. The initiative by the Goverment of India to help start-up enterprises includes the MUDRA Loan Scheme under Pradhan Mantri Mudra Yojana, Start-up India, PSB Loans in 59 minutes, Credit Guara Fund Trust for Micro and Small Enterprises (CGTMSE), Atal Innovation Mission, Make in India, etc.
