How To Raise Funds For Start-Up Company In India?

What is a Startup Company?

A Startup Company is an entrepreneurial venture which is newly emerging, a fast-growing business organization that directs to meet the marketplace needs by developing a new business model around a new product or service or process.

A start-up business unit has a high rate of failures and minority of them taste success. The one who is victorious become large and influential over a period.

Ways To Raise Funds For Start-Up Company

Bootstrapping - It refers to the self-starting process, whereby the entrepreneur uses his/her own savings money or can get the family and friends to contribute to the initial capital of the company. It is the most comfortable method to raise funds since there will be no formalities or complications and there is no cost incurred in raising funds.

Crowdfunding

Crowdfunding is the use of small amount of capital or money from a large number of individuals to finance a new business venture. This kind of financing is done through a vast network of people across the social media. This type of funding provides an opportunity for the entrepreneur to expand the pool of investors from whom funds can be raised beyond the traditional circles.

Angel Investors

Angel Investors, are individuals with surplus cash and who are interested in investing in new upcoming startups. They also work in groups of networks to screen the investment proposal before investing. They also provide other services like mentoring or advising to the startups apart from funding.

Venture Capital

This type of funding is done by Venture Capitals who professionally manage funds and invest in companies which have enormous potential for growth. They invest funds in business against equity and exit at the time of an IPO or acquisition. Apart from funding, they also provide mentorship service, expertise and act as a litmus test of where the organization is going, evaluate the business from sustainability and scalability point of view.

Bank Loans

Banks also provide loans for startup ventures. It provides funds in two forms namely, working capital loan and funding. A Working Capital loan is offered to meet the everyday operations of a company. They are not used to buy long-term assets or investments. Its used for accounts payable, wages, salary, etc. Funding will include the usual process of sharing the business plan for an extended period, its valuation details, project report. The loan will be sanctioned after evaluating the reports mentioned above.

Business Loans From Microfinance Providers or NBFC's

Microfinance is a type of banking service that is mostly provided to the unemployed or low-income individuals who do not have access to another kind of financial services. Non-banking financial companies or NBFCs are the financial institutions that provide certain types of banking services, but they do not have a banking license. Startups can also raise funds through microfinance providers or NBFCs.

Government Schemes For Startups

The Government of India backed "Pradhan Mantri Micro Units Development and Refinance Agency Limited" or popularly known as MUDRA scheme started with initial funding of Rs 20,000 crore aims to extend benefits to around 10 lakh small and medium scale enterprises.

What's in for Startups in Union Budget 2018?

The Union Finance Minister, Arun Jaitley announced proposals in his budget for the year 2018-2019, for Startup Companies. Jaitley in his budget speech mentioned the creation of new regulatory regime for venture capital funds and angel investors, five lakh Wi-Fi hotspots in rural areas, hybrid instruments, a programme for artificial intelligence to attract venture capital investment.

As per the budget announcement, the government has raised the ceiling for 25% corporate tax bracket for up to Rs 250 crore annual turnover, which is up from the previous Rs 50 crore annual turnover. Majority of startup companies will come under this tax rebate. This proposal brings in cheers to many startup firms in the country.