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How to Raise Funds for Small Business in India

Are you interested to explore various ways of funding startups?  If so, read this article to know more about different ways to raise funds for business in India.

Congrats if you have conceived a  startup with a new business idea. However, a mere idea will not help you in taking off. Today as a startup entrepreneur you have to understand the startup ecosystem. Here are some ways aspiring entrepreneurs can make their idea happen through the various options mentioned below.

11 Ways to Raise Funds for Small Businesses in India

1. Use your Own Savings

The best and recommended way of financing a startup business venture is self-financing. Though there is an unlimited financial risk involved in it, it is normally observed, entrepreneurs starting their venture with their own money have a success percentage. It is seen investing in his/ her own makes you as an entrepreneur more serious and committed to your business ventures.

Check your savings and figure out how much money you can inject into the business. Take care, you have a balance for at least the coming 12 months to take care of the financial requirements for yourself and your family.

2. Install Loan Apps

Presently, there are many NBFCs and financial institutions that have launched mobile apps for quick disbursing of various types of loans. The biggest advantage of these types of apps is that loan sanction and the processing time are very short.

After installing the mobile apps, you just need to fill in some details and the amount you want. In a short period of time, you will get to know whether the fund will be provided or not. One can get a loan as small as Rs.10,000 from these apps.

Read: Best Loan Apps in India for Instant Cash

3. Use your Credit Cards to Raise Funds for Business

Using your credit cards in a smart way is another popular way of financing small business initiatives.

However, you must be careful about spending money on credit cards as you have to pay a hefty amount of interest in case the repayment remains unpaid. You can check our post on the best business credit cards.

4. Bank Loans

Banks are the most popular go-after destinations for entrepreneurs looking forward to starting and growing their small businesses. Broadly, banks provide two kinds of loans. One is a term loan and another is a working capital loan.

If you want to know more about loans and loan providers, check our detailed post on the best business loans for small-scale businesses.

5. Get Funds by Winning Contests

Recently many organizers are hosting funding contests. Here, you need to present your product or business plan in front of investors looking to invest in startups. If you can convince the investors worth investing in your business project, funding is not going to be a problem anymore.

You can check organizers like  NASSCOM’s 10000 startups.

6. Startup Incubator

business incubator is a company that helps startup companies with a new business idea to develop by providing services such as management training or office space, the platform for networking.

Business incubators differ from research and technology parks in their dedication to startup and early-stage companies. Research and technology parks, on the other hand, tend to be large-scale projects that house everything from corporate, government, or university labs to very small companies.

Most research and technology parks do not offer business assistance services, which are the hallmark of a business incubation program. However, many research and technology parks provide house incubation programs.

Check out companies like AdvantEdge, iCreate, etc if you are looking for business incubators.

7. Startup Accelerator

An accelerator is almost similar to an incubator, except for a few variants. Normally the association is limited to a specific duration, ranging from a few weeks to a few months. An application process normally is required for startup companies with a new business idea.

Accelerators acquire a stake in the startup, from around 5 to 25% of the equity when you are coming up with a new business idea.

TLabsStartup Village provides business accelerator services in India

8. Angel Investment

As Wikipedia puts it, “An angel investor or angel (also known as a business angel or informal investor or angel funder) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.

9. Seed Capital

This kind of capital is required at the very early stage of business. You can call it a conceptual stage or an idea stage. Normally this fund comes largely from promoter assets or his/her known friends and relatives. Examples of popular seed capital providers in India are Seedfund and Kae Capital.

10. Venture Capital

Venture capital (VC) is financial capital provided to early-stage, high-potential, growing startup companies with a new business idea. Normally, a venture capital fund earns money by owning equity in the companies it invests in.

Helion Ventures and Accel Partners are a few among many active venture capital providers in India.

11. Crowdfunding

It is relatively a new way of financing startups. Crowdfunding is basically sourcing small amounts of capital from a large number of individuals to finance a new business. The most popular ways of sourcing crowdfunding are donation-based, reward-based, and equity-based.

In addition to this list, peer-to-peer (P2P) lending is getting popular means of funding startups. It is a mechanism where individuals can get or invest money without any financial institution facilitating in between. Popular Peer to Peer Lending sites is Upstart and Funding Circle.

About Next What Business Research Team

The Editorial Staffs at NextWhatBusiness is a team of Business Consultants with years of experience in small and medium-scale manufacturing and service-based businesses.