What are the different types of Funding for Indian Startups?
The startup India action plan was launched in 2016. The initiative of the Indian government to simplify the process of patent filing and establishing a startup is the main reason we are experiencing so many new Indian startup initiatives in this time. Many new startups are contributing to Make In India initiative of the Indian government. A startup is a young initiative endeavour by a handful of people or sometimes, even an individual. When a company is just getting started, their expenses always exceed their revenues. Startups work on developing and marketing their ideas and that is why they need to be funded initially without any expectation of returns. There are many types of funding options available to an Indian startup to continue its business. If a wrong choice is made in the initial stage of funding an Indian Startup it can end up messing up with the basic requirements of your business endeavours.
We will try to note some basic funding sources in this article so that the individuals with ambitions of establishing a startup can get a clear view.
- Personal Funds
If a group of individuals or a single individual decide to utilise their own cash to start their business then it is called a personal savings funding method. To support an Indian startup, you can use your own money and this way you have absolute control over the whole capital of your startup. you can use your money in whichever way possible and you will be answerable to no one as the money used to fund your startup was your own.
- Crowd funding
If an Indian startup company gathers a pool of investors to help them raise the funding, then it is called crowdfunding method. The initial funding is by a large number of individuals generally gathered by means of personal connections and other contacts. As this kind of Indian startups already have a large number of investors, the capability of extending the business rises. But crowdfunding demands a lot of dedication and effort in the initial stages of the startup as one has to gather individual investors to fund the business.
- Angel investors
Those businessmen who help funding an Indian startup by demanding some amount of shares in the business are called as angel investors. These investors can either work in a group and jointly ask for a particular amount of shares in a startup or they might invest in it individually. As the investors funding a startup are experts and have knowledge in the business the startup is are in they can provide excellent guidance and assistance. But some of these initial fund providers can also become highly dominant over an Indian startup and control some of its business by their own choices.
- Bank loans
Bank loans are the most popular kind of funding sources for any Indian startup. There is an abundant availability of various government business funding schemes and programmes. Especially after the announcement of ‘Make in India’ initiative in 2016, a lot of funding schemes specially made for Indian startups have come into being. Bank Loans are ideal for funding your startup as you don’t need to give up any control over your business and also, the procedure of providing funds is also fast and simple.
- Venture capital
Those investors whose fund an Indian startup with their own resources and capital in return of profits from the business when it finally runs are called venture capitalists. Their only demand in return of the cash funding they put up in a startup is to get returns when the startup starts doing its business. Startups which are funded by venture capital funding gain a lot of validity as Venture Capitalists open up different ways to a large community of financial specialists, businessmen etc.
- Small business administration loans
SBA is a particular department which helps in assisting Indian startups and independent business endeavours to get funding and capital investment. SBA loans are business loans and they have multiple funding programs which guarantee that 85% of the loan provided to any Indian startup is from SBA approved lenders, which are mostly banks. SBA loan programs let any Indian individual raise funds for any business activity including startups.
So before getting into the business world and engaging in a Startup, educate yourself about the different funding sources available for your startup. Keep in mind your needs and then only go for a reliable financing source to fund your startup. With the right type of funding, any Indian startup can develop into a successful business.