Starting their own business and reaching heights of success is the dream of every Indian today. While digitisation and a vast market have made it very easy for business owners to start their own business in 2021, staying afloat is where the real struggle comes in. A lot of time, investment, resources, and energy is required to keep the business running and grow its roots with time. Putting in the required amount of time, energy, and resources is something that varies from business owner to business owner, but luckily when it comes to investments, every business owner has multiple options. Irrespective of the size and nature of business, every business needs loan capital at one point to sustain its operation and growth.
What Is Loan Capital?
More than 1000 start-ups are launched every year in India, but 90% of them are closed due to a lack of innovation and funding. While fresh ideas, hard work, determination, etc are what decides the success of any startup, what funds these things is the availability of steady funds or working capital. In most cases, loan capital is required to cover the operational costs. You can learn about the different types of loans for startup businesses in India below:
Loan From Family & Friends:
This type of loan is best-suited for fulfilling short-term requirements of small funds and are ideally taken while starting the business, While this type of loan can be availed easily with minimum or no interest, it’s not advisable as it may sour relationships and the loan amount isn’t substantial enough to keep the business running.
Crowdfunding is becoming one of the most popular ways of raising funds for startup businesses these days. Under crowdfunding, funds are raised from crowdfunding platforms and is an ideal way of raising funds for businesses that don’t qualify for business loans from financial institutions. All one needs to do is post their business idea on a crowdfunding platform, and then promote it on social media. People invest in business ideas in exchange for premium/priority access to your product/services. However, this method of raising funds is suitable only for unique products/services and not general business ideas.
Angel Investors are another great source of funding for small businesses. These investors fund your business in exchange for equity in the business and are a great source of interest-free funding. The downside of this method of funding is that business owners may have to share part ownership of their business with their investors and may not be able to take their own business decisions without consulting the angel investor.
Loans from Financial Institutions:
Financial institutions also offer loans for startup businesses in India. You can get funds up to Rs.45 lakh with minimal documents and no collateral. Bajaj Finserv, one of the leading financial institutions in India, offer a loan for startup business in India that comes with the attractive terms and
Financial institutions are slowly becoming a popular and safe resource for availing hassle-free business capital funding.
Eligibility for Availing of a loan or Startup Business in India:
A start-up loan for small and medium businesses can be easily availed if a business owner meets the following eligibility criteria:
– They have to be an Indian citizen between the age of 24-70 years
– Their business must be operational for a period of minimum of three years
– Their CIBIL score should be 685+
Now that you know what is loan capital and the ways you can secure it, you can decide the best source of funding according to your requirements and then gather the right amount of funds you need to sustain and grow your business.