A business loan is essential for any business. It is even more pertinent for startups, most of whom begin their journey without much capital. It is this paucity of initial funds that hamper growth. A business loan becomes the beacon of hope for them. MSME loans and CGTSME loans are available with lenders at competitive rates. However, for startups, they may vary.
One of the important reasons why startups fail is because of liquidity issues or paucity of funds. They want to expand but their plans become unsuccessful primarily because the finance dries up. Most startups are bootstrapped or the initial funding is from friends and families. It becomes a down the hill affair after that. However, there are a few ways where a startup can garner funds for themselves.
Look for an Angel Investor
An investor who appears like an angel, with funds, of course, is generally termed as an angel investor. This group of investors have surplus funds and look for opportunities to invest. The earlier model to park funds in financial institutions is passé. They now look for investment vehicles that have the potential for higher returns. A successful startup has the inherent quality to provide a neat return.
Business Loans through Government Schemes
The government of India has a plethora of loan schemes specially designed for startups. Standup India scheme, Pradhan Mantri Mudra Yojana or PMMY and CGTSME loan encourage entrepreneurs to join hands and build disruptive ideas for the future. There are microfinance schemes for female and backward region entrepreneurs too.With these funds, the government of India is confident that startups will be able to provide themselves with the necessary impetus to grow.
Business Loans from Banking Institutions
There are plenty of banking institutions that have schemes that startups can avail themselves of. There are term loans and loans for working capital. The entrepreneur has to do thorough research into what kind of loans he or she is looking for. There are MSME loans and CGTMSE loans that can be got at attractive rates too. The government has mandate public sector banks to focus on the startup community of the country. This has led to banks becoming more aggressive in their approach towards funding. This bodes well for innovation.
NBFCs
Non-banking financial corporations are also equally gung-ho about the start-up scene. They too have rolled out plenty of financial schemes which the startups can avail themselves. However, the business loan interest rates offered by some of the leading NBFCs like Ziploan are much more competitive in nature as compared to banking institutions. However, the advantage one gets dealing with the NBFCs is a quick turnaround time and a hassle-free experience. Customer service has always been one of the highlights of NBFCs and with business loans for startups, they intend to take it to a higher level.
Credit Cards
Many financial institutions provide their customers with business credit cards. These credit cards have a higher credit limit and an annual charge. With the explosion in the Indian startup scene, the business credit card has become a handy tool for banking institutions. They help the startups tide over the current challenges and use the instrument as a normal credit card. Small amounts can always be used through the business credit card and when paid on time improves the credit score and also saves the user from penalties. Lastly, the government through its hugely successful Stand up India scheme, PMMY scheme, and CGTMSE loan scheme has been able to inject much-needed vigor and impetus into the startup movement in the country. With the funds easily available, it is only a matter of time before there will be a proliferation of startups and the country will become the hub of creative breakthroughs.
