If you are planning to expand your business to Delhi or want to unlock the entrepreneurial opportunities in Delhi, you are on the right path. Delhi is the newest startup hub in India – it has more startups and unicorns than Mumbai and Bengaluru. But as with any other business in any other city, irrespective of the nature and size of operations, you require funds to execute your plans at every stage of your business. According to a recent study, over 94% of new businesses fail in the first year itself due to a lack of funds.
Therefore, it is essential to make yourself familiar with the various funding options in Delhi. So, here they are:
1. Self-Funding or Bootstrapping
Self-funding is an effective way to finance your business, especially when you are just starting out. If you are a first-time entrepreneur, it is a challenge to get funds without showing some traction and a business plan for potential success. In such a scenario, you can use your own money to invest in your business. Or you can borrow from friends and family at a low-interest rate. Bootstrapping is a good option if the initial requirement you need to get your business expansion plan off the ground is small. But, if you need a larger investment from day 1 of your business, you may have to look at other finance options.
2. Personal Loans
Banks, financial institutions, and online lending platforms offer personal loans for the businessman at competitive interest rates and flexible loan terms. It is the fastest and easiest way to get finance to fund your business in Delhi. These loans may help you when you have trouble qualifying for a traditional business loan. A personal loan is a flexible financial product and some of the ways you use this small business loan are as follows:
- Invest in your firm’s infrastructure
- Meet working capital requirements
- Install new plant and machinery
- Pay salaries
Some of the online lending platforms offer a personal loan in Delhi in the form of a line of credit. Once your line of credit is approved, you can withdraw as much as you want and pay interest only on the amount withdrawn and not on the entire credit limit. You can also keep this credit line active for as long as you wish, even after repaying it. That means if you ever encounter an emergency situation, this line of credit can work as your emergency cash stash.
3. Traditional Business Loan
Banks offer business loans, but it’s not easy to get one. It is very difficult to qualify for a business loan because of its stringent eligibility criteria. Be prepared for a lot of documentation. You need to have a detailed business plan with a clear explanation of how much you need, why you need, where you plan to utilise the funds, your current business cash flow situation, and the returns you are expecting.
Crowdfunding is one of the newer ways of funding a startup. You can put up a detailed description of your business on the crowdfunding platforms. The description can include your business goals, your profit-making plans, how much you need, and for what reason, etc. Consumers can decide to contribute if they liked your idea. But, if they contribute money to your business, you need to give something to them in return, which could be either your product or some donation.
Keep in mind that crowdfunding is not as easy as it sounds. It is a competitive place. Unless you have a rocking business idea and an equally solid business plan, you stand a chance to get crowdfunded.
5. Angel Investment
Angel investors are wealthy individuals who usually invest money in the early stages of business growth. They screen your business proposal before investing and expect up to 30% equity. Along with the investment, they also mentor and advise you on certain aspects of the business.
6. Venture Capital
This is where it gets bigger. Venture capitals or VCs are people who invest big in companies that have huge potential. They invest in business against equity and usually exit when there is an IPO or an acquisition. VCs are appropriate when your business is beyond the startup phase and is already generating revenue. They provide expertise, mentorship and always evaluate the business from sustainability and scalability point of view.
These are some of the best funding options in Delhi. Consider the type of business and your business needs and choose the funding option that’s best suited for your business in Delhi.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at shiv[@]moneytap.com.