However, every entrepreneur needs capital to get his/her business up and running. And this financing is extremely crucial, especially during the initial stages. As a new business setup, funds are required to set up shop, initiate operations, begin marketing, hire staff, develop products and services amongst other things. If you are a budding entrepreneur, you need to ask yourself this - 'Where do I arrange capital for my business from?'
India has a plethora of funding options available today. From banks to NBFCs, there are more number of financial institutions than one can count and most of them provide a facility of 'Start-up loans'.
What is a start-up loan?It is a special type of business loan which is provided by a financial institution and works in a similar manner to a credit card. Banks and other NBFCs grant start-up loans to entrepreneurs if they are convinced of the business model, growth projections and profit-making capacity of the company.
What are the benefits of a start-up loan?Here are some perks of taking a start-up loan to kickstart your venture -
1. Low rate of interest - As compared to an angel funding or an investment from VCs, banks ask for a lesser return in the form of a low rate of interest. The interest rate can fall anywhere within the category of 10-17% depending on the credit score of the company and the entrepreneur.
2. Simplified process - It is extremely easy to approach a bank for a start-up loan as compared to trying to get in touch with investors and seeking funding from them.
3. No profit sharing - Another important benefit of availing a start-up loan is that you will not have to share your profits with the bank. Your profits belong to you only. Whereas in a setup where your company gets funded by a VC or an angel investor, you'll have to include them in your company profits.
Availing a start-up loan is easy, however, it is imperative that you and your business maintain a good credit record and use the funds appropriately to build the venture and make it profitable.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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