How to Get Difference Types of Business Funding in India

Looking to secure funding for your business? Different types of funding are available, such as capital loans and business funding. To increase your chances of success, it's important to have a solid business plan, a clear understanding of your financial needs, and a well-prepared pitch. With these tips and tricks in mind, you will be on your way to securing the funding your business needs to thrive. 

Let’s begin with understanding the various types of funding available for businesses.  

Types of Business Funding 

Self-Finance your Start-ups

Starting your own business can be difficult, but if you use your money to do it, it can be rewarding. This is called self-financing. It means you have complete control over your business funding and don't have to worry about paying back loans or pleasing investors. However, you need to think carefully about your money situation and plan your budget. 

You should have a good plan for your business and know how much money you need to start and keep it going. Self-financing can be a great way to start a successful business without borrowing money if you plan it right and work hard.

Benefits

• Complete control over your business without outside influence.
• Make financial decisions that align with your long-term vision for the company.
• Self-financing can help you build a good credit history and financial stability for your business.
• Maintain your privacy and avoid disclosing sensitive business information.

Apply for a Business Loan from a Private/Public Sector Bank

If you are wondering about other methods of how to get funding for a business, then consider getting a Business Loan. Applying for a Business Loan from a private or public sector bank can be a great way to obtain funding for your business. They offer a range of loan options that can be tailored to your needs, including term loans and working capital loans. 

The loan amount, repayment terms, and interest rates will vary depending on the lender’s policies and your creditworthiness. To increase your chances of success, it's important to have a solid business plan, financial projections, and collateral or personal guarantees. 

Benefits

• Competitive interest rates compared to other forms of funding.
• Flexible repayment terms that can be customised to fit your business needs.
• A Business Loan can help you build a strong credit history and improve your creditworthiness.
• Banks offer a range of loan options, allowing you to choose the best one that suits your business needs.

Avail Small Business Loans from NBFCs or MFIs

Small business loans from Non-Banking Finance Companies (NBFCs) or Microfinance Institutions (MFIs) can be an ideal funding option for entrepreneurs who are unable to secure loans from traditional banks. NBFCs and MFIs offer loans specifically designed for small businesses, with flexible repayment terms and large loan amounts. They may also have less stringent eligibility requirements than traditional banks, making it easier for small businesses to qualify. Overall, availing small business loans from NBFCs or MFIs can provide a reliable source of funding for entrepreneurs who need financing to start or expand their businesses.

Benefits

• Flexible eligibility criteria and loan amounts
• Faster processing times compared to traditional bank loans
• Potential financial assistance to help small businesses grow
• A good option for entrepreneurs who are starting and may not have an established credit history

Consider Government Loan Schemes for Funding

Government loan schemes in India are a popular funding option in India for entrepreneurs. These schemes are designed to support SMEs and offer funding at lower interest rates than traditional bank loans. For example - the Start-Up India scheme, Mudra loan scheme, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), etc. These loans can be used for various purposes, such as starting a new business, expanding an existing one, or investing in equipment or technology. 

Benefits

• Affordable and accessible financing for SMEs
• It can be used for various purposes, such as starting a new business, expanding an existing one, or investing in equipment or technology
• Schemes are designed to support SMEs
• Helps promote entrepreneurship and economic growth.

Checkout the Latest Business Credit Cards

Business credit cards can also be a useful business funding in India option for small business owners needing access to quick and convenient financing. These credit cards offer flexible repayment options, low-interest rates, and rewards programs that can help businesses save money on purchases. 

However, using these cards responsibly and only for necessary business expenses is important to avoid accumulating high-interest debt.

Benefits

• Offers quick and convenient access to financing
• Helps establish credit and improve credit scores for the businesses
• Rewards programs can offer cash back or points that can be used for future purchases
• Can help separate business expenses from personal expenses

Arrange funds from Online Crowdfunding portals

Arranging funds from online crowdfunding portals can be an effective way to secure business funding. Crowdfunding allows businesses to raise capital by receiving small contributions from a large number of people, often through online platforms. It also offers a way for businesses to receive funding without giving up equity in the company or incurring debt. However, it's important to have a well-planned campaign and a clear idea of the target audience to maximise the chances of success.

Benefits

• Access to a large network of potential investors
• Ability to test market interest in a product or service
• Increased exposure and brand recognition for the business
• It can be a cost-effective way to secure funding

Peer-to-Peer Lending

Peer-to-peer (P2P) lending is a form of online business loan scheme that connects borrowers directly with investors. P2P lending platforms act as intermediaries, facilitating parties' borrowing and lending process. It offers several benefits for businesses, including the ability to access funding quickly, with fewer restrictions and lower interest rates compared to traditional lenders. It also offers a way for businesses to secure funding without giving up equity or collateral. However, businesses must have a good credit score and a solid financial history to qualify for P2P lending.

Benefits

• Quick access to funding with flexible loan terms
• Flexible interest rates compared to traditional lenders like banks
• Ability to appeal to a wider range of investors and secure funding even with a less-than-perfect credit history.

Find an Angel Investor

An Angel Investor is an individual who invests in a start-up or small business in exchange for equity ownership. They provide funding, mentorship, and expertise to help the business grow. Finding an Angel Investor can be a good option for entrepreneurs with a unique business idea but lacking funds to get it off the ground. 

Benefits

• They are more flexible compared to traditional lenders.
• They are good for long-term partnerships and can support your business.
• They often have higher risk tolerance. 

Equipment or Machinery Loan

An Equipment or Machinery Loan is designed to help businesses purchase or upgrade their equipment or machinery. This type of loan can help businesses conserve their working capital while still acquiring the necessary equipment or machinery to operate efficiently. The interest rates and terms of equipment or machinery loans may vary depending on the lender and the borrower's creditworthiness.

Benefits

• Enables businesses to purchase necessary equipment without a large upfront investment
• Helps businesses to stay competitive by upgrading their machinery or equipment
• Interest paid on the loan may be tax-deductible, which can help to reduce the overall cost of financing.

Bank Overdraft

A bank overdraft is a flexible and useful financing option for businesses. It allows businesses to withdraw more money than they have in their accounts up to a predetermined limit. Interest is only charged on the amount overdrawn, and the interest rate is generally lower than other types of loans. 

Benefits

• Provides quick access to funds without collateral.
• Helps in managing cash flow and meeting short-term financial requirements.
• It can be used as a backup funding option.
• No need to specify the purpose of borrowing.

Conclusion 

By utilising the right strategies and resources, securing funding for your business can be an achievable goal. Whether through traditional funding methods or innovative options, the key is to be prepared, persistent, and adaptable.