5 Funding Options to Raise Startup Capital for Business in India
Why is it that about half of all new businesses fail within the year they start? One answer to that is these businesses did not have sufficient funding options that raised their startup capital, so they simply did not have enough to succeed from the get-go. There are numerous ways to boost startup capital for businesses in India. Read on to find out about five helpful funding options and how they might work for your business.
#1. Show Your National Pride
As Kofu Akinkugbe has done for sim card manufacturers in Nigeria, show investors and clientele in India that you have national pride. As a local resource, companies might be more tempted to work with you. Additionally, you can offer up pre-sales of products with specials targeted at those who are buying from within your country. You might have to get an angel investor who is genuinely interested in your products and objectives. Their cash surplus can help out in your company’s early stages of development, and if you build a positive working relationship with the investor, you will have a good reference for future business proposals.
#2. Do Some Crowdfunding
Crowdfunding is one of the most sure-fire ways to build startup without accruing debt or relinquishing equity. Crowdfunding gives you an opportunity to do some marketing in conjunction with raising capital. It shows investors that you have a solid business concept. By utilizing crowdfunding, you can read out to a broad market throughout India and abroad and develop a loyal customer base early in your business’s lifespan.
Understanding the demographics of Kickstarter and Indiegogo backers is key to creating a successful crowdfunding campaign. Check it out below!
#3. Acquire Venture Capital for Your Startup
Once you have gotten comfortable with where your business is at in its startup phase, you can take a few more risks by getting venture capitals, which are managed funds that invest in businesses that demonstrate their high potential for success. Venture capitals often invest against equity and will exit once an acquisition or IPO takes place. A venture capital can act as a mentor, but you should take note that most venture capitals seek to regain their investments within three to five years. If you have a product that is going to be slow at making it onto the market, venture capitals might pass on you. However, if you have a clear vision, larger-sized company team, and sufficient traction, venture capitals might be interested in investing in your business.
#4. Apply for a Few Bank Loans
Should you fail to acquire other kinds of funding or need the extra boost as you are getting your startup off the ground, you might want to consider applying for bank loans. A bank can provide a working capital loan and/or funding. Before applying, you should be aware of your current credit and credit history, and you should also have a clear plan for how you will pay back your loans so that you do not end up defaulting on them. Most banks in India offer programs that have SME financing. Some of India’s top banks (such as Axis and Bank of Baroda) offer 7 or 8 collateral-free business loan options that you can choose from depending on your needs.
#5. Consider Governmental Debt Funding Schemes
If your startup seems solid, there are several programs implemented by the Indian Government that have debt funding schemes. The best ones out there right now appear to be CGTMSE and the Prime Minister’s Employment Guarantee Programme (PMEGP). Under the CGTMSE debt funding scheme, the Indian Government will fund up to Rs. 2 crores for a startup business in India. The PMEGP scheme has a maximum credit limit of 10 lakh for a service unit and 25 lakh for a manufacturing unit.
While your business is in startup mode, building capital is crucial. Keep an open mind, as you will likely need to try multiple funding options as you get your business off the ground. Remember, the key to attracting investors and loyal clientele alike is to have a strong business model and unique product or service that meets consumer demand in India and abroad.