Smart Ways to Finance Your New Business in India

The startup ecosystem and the economic environment in India are favoring aspiring business minds. According to the recent survey of 2020-21, the Government of India recognized 41,061 startups.

Currently, India houses the third-largest startup ecosystem and creates massive job opportunities. Initiatives like “Startup India”, “Startup India Seed Fund Scheme”, etc., are accelerating the process. Hence, if an individual plans to translate his business ideas into reality, this is the right time.

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5 Smart Ways to Finance Your New Business in India 

However, it is often challenging for an individual to access business finance options to build the foundation of their new business. Hence, to gain momentum in the initial phase, here are the 5 smart ways an individual can opt to start a new business in India:

Begin with self-funding

Self-funding or bootstrapping is an ideal plan when it is difficult to raise funds with others’ help. It includes options like a savings account, credit cards, etc. Self-funding involves less risk as the individual is not forced to pay off borrowed funds. At the same time, if the company becomes successful, the business owner can save sizeable profits to attract investors for further business growth. 

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Crowdfunding is a process in which entrepreneurs can connect with more than one investor via social networking sites or web-based P2P platforms to raise business finance.  For that, one needs to have a clear business plan and model to attract such investments.

Investment from venture capitalists and partners

Taking help from venture capitalists is one of the ideal ways to help your business raise finance. These are top-tier agencies that offer business finance to budding ventures in their initial stages. These firms evaluate a business for its sustainability before investing against equity and leave when there is an acquisition. Venture capitalists often provide mentoring. Hence, if one opts for venture capitalists, he needs to be flexible and accept close monitoring.

On the other hand, strategic partners can help raise funds for a new business by investing their resources. These partners can also be an employee of the company. 

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Government schemes

To promote business growth in India, the Indian government has launched schemes under the category of Union Government Schemes for Business in India. Here’s a list of such schemes which can help to finance your growing business:

  • Mudra loans – This loan provides business finance to the non-corporate, non-farm micro or small enterprises. 
  • Standup India – This scheme is governed by the Small Industries Development Bank of India to offer business finance to individuals under the Scheduled caste or Scheduled tribes category and women entrepreneurs. 
  • Credit Link Capital Subsidy – This scheme offers funds to small businesses for technological upgradation, marketing, manufacturing, supply chain, etc. Through this scheme, the government allows small and micro-businesses to reduce production costs and help them remain cost-competitive in the local and international market.

Other loans include:

  • MSME loan in 59 minutes
  • National Small Industries Corporation

Short-term loans 

After acquiring a business vintage of three years, one can opt for short-term business loans.  It can be availed to address urgent cash crunches, business expansion,  covering operational costs, etc. This can also serve as a machinery loan. These come with a fixed rate of annual interest. 

The cordial relationship with the lender and strong business credit history often helps businesspersons obtain this loan without any collateral.

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Trusted NBFCs like Bajaj Finserv provide unsecured business loans upto Rs.45 lakh at attractive interest rates against meeting minimal documentation and simple eligibility parameters. At the same time, such financial institutions offer pre-approved offers to their existing customers to streamline the process. You can check your pre-approved offer by providing your name and contact details. 

Funding a new business is often challenging. But it is essential to take advantage of new market opportunities coming in India, which is likely to grow. For example, the government is broadening the definition of new businesses, including simplifying the regulations, providing tax exemptions, and setting up funds of Rs.10,000 crore  for startups, operated by Small Industries Development Bank of India.

Hence, it is essential to keep striving to translate one’s dream of setting up a new business of their own while keeping in mind the multiple business finance methods.


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