How to raise Money for your Startup

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10 Government Schemes especially for Startups

The Government of India (GoI) and governments of several states have introduced schemes to finance and support startups. The GoI formulates provisions to alleviate the conditions of startups in its financial budget. Government schemes can be availed by startups if they fall under the definition of a startup provided by the GoI. The process of recognition as a “startup” can be availed through an online application.

Following are some of the important schemes launched by the GoI to assist startups in sustaining growth and marketability:

1. Newgen Innovation and Entrepreneurship Development Centre (Newgen Iedc)

The NewGen Innovation and Entrepreneurship Development Centre (NewGen IEDC) is being promoted in educational institutions to develop institutional mechanism to create entrepreneurial culture in S&T academic institutions and to foster techno-entrepreneurship for generation of wealth and employment by S&T persons. The NewGen IEDCs are established in academic institutions (science colleges, engineering colleges, universities, management institutes) having requisite expertise and infrastructure.  

Objective of the Scheme

• To channelize the knowledge and the energy of youth towards becoming active partners in the economic development process                                                                                               

• To catalyze and promote development of knowledge-based and innovation-driven enterprises and promote employment opportunities amongst youth specially students                                      

• To inculcate a culture of innovation driven entrepreneurship                                                         

• To act as an institutional mechanism for providing various services including information on all aspects of enterprise building to budding S&T entrepreneurs. 

Eligibility: The parent institution should have required expertise and infrastructure. This includes a minimum dedicated space of about 5,000 square feet to establish a NewGen IEDC, library, qualified faculty, workshops, etc.

Funding: The NSTEDB startup scheme by the GoI will provide a limited, one-time, non-recurring financial assistance on year-to-year basis, up to a maximum of 25 lakh INR. Also, non-recurring grants would be provided for supporting working capital cost.

More Info: http://www.newgeniedc-edii.in/

2. Modified Special Incentive Package Scheme (M-Sips)

In order to promote large scale manufacturing in the country, M-SIPS was announced by the Government in July, 2012 to offset disability and attract investments in Electronics System Design and Manufacturing (ESDM) Industries. The scheme provides incentive for investments on capital expenditure- 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs. The Scheme was revised vide notification dated 03-08-2015 which was further amended vide notification dated 30-01-2017. The Scheme was closed to receive new application on 31 December, 2018.

Salient Features of the Scheme

  1. Capital Subsidy – 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs.
  2. Incentives for both new units and expansion units.
  3. Incentives for a period of 5 years from the date of approval of application.
  4. Incentives for 44 categories/verticals across the value chain (raw materials including assembly, testing, packaging and accessories, chips, components).
  5. Minimum investment threshold for each product category/ vertical (from Rs 1 crore for manufacturing of accessories to Rs 5000 crores for memory semiconductor wafer fabrication unit.
  6. Unit to be in Industrial Area notified by Central/State Govt.

Eligibility: New or existing expanding projects engaged in electronic manufacturing.

Funding: The scheme provides capital subsidy of 20% to SEZ and 25% to non-SEZ for enterprises engaged in electronic manufacturing. Reimbursement of excise duty for capital equipment in non-SEZ units or CVD is also provided. The scheme is available for those categories where investment threshold is of 1 crore INR to 5000 crore INR.

More Info: https://meity.gov.in/esdm/incentive-schemes

3. Credit Guarantee Fund Scheme for Micro and Small Enterprises

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is jointly set up by Ministry of Micro, Small & Medium Enterprises (MSME), Government of India and Small Industries Development Bank of India (SIDBI) to catalyse flow of institutional credit to Micro & Small Enterprises (MSEs). Credit Guarantee Scheme (CGS) was launched to strengthen credit delivery system and to facilitate flow of credit to the MSE sector, create access to finance for unserved, under-served and underprivileged, making availability of finance from conventional lenders to new generation entrepreneurs. Over the past 20 years, CGTMSE has been instrumental in providing guarantee cover to collateral and/or third party guarantee free credit facilities extended by eligible Member Lending Institution [MLIs] to MSEs.

Eligibility: MSMEs

Funding: The credit facility covers both term loan as well as working capital facility up to 1000 crore INR per borrowing unit. The guarantee is extended to both new and existing enterprises without any collateral security or third-party guarantee.

More Info: https://dcmsme.gov.in/schemes/sccrguarn.htm

4. Performance & Credit Rating Scheme

Small-scale industries occupy an important position in the development of our economy. Credit rating SSI will encourage them to increase productivity as good credit rating will enhance their acceptability in market. Rating agencies have different schemes to rate different SSIs. All recognised MSMEs are eligible for the scheme.

This scheme seeks to establish independent, trusted third party opinion on capabilities and credit-worthiness of MSEs, and makes credit available at attractive interest rates and will ensure better productivity. Under this scheme (as per the turnover of the MSE) a percent of Rating Agency charges are reimbursed by Ministry of SSI.

Benefits

The major benefits accruing under the scheme to the rated units include:

  1. Rating is an independent, trusted third party opinion on capabilities and credit worthiness of MSEs.
  2. Rating enables MSE units to ascertain the strengths and weaknesses of their existing operations and take corrective measures to enhance their organizational strength.
  3. Good rating enables MSEs to access to funds at cheaper rates and better terms,
  4. Rating facilitates prompter credit decisions from Banks on proposals of MSEs.
  5. Good rating enhances the acceptability of the MSEs with their customers and buyers.
  6. Facilitate buyers in capability & capacity assessment of MSEs before finalizing purchase contracts.

Eligibility: Recognised MSMEs

Funding: This scheme seeks to establish independent, trusted third party opinion on capabilities and credit-worthiness of MSEs and makes credit available at attractive interest rates ensures better productivity. Under this scheme (as per the turnover of the MSE) a percent of Rating Agency charges is reimbursed by Ministry of SSI. Fee to rating agency is based on turnover of the SSI. The turnover of SSI is categorised into three slabs. Based on the slab into which the SSI falls, specific percent of rating fee can be availed from ministry.

More Info: https://www.startupindia.gov.in/content/sih/en/government-schemes/performance_and_credit_rating_scheme.html

5. Raw Material Assistance

Raw Material Assistance Scheme aims at helping MSMEs by way of financing the purchase of Raw Material. This gives an opportunity to MSMEs to focus better on manufacturing quality products.

 The objective of the scheme is to help MSMEs to procure raw materials by financing. Both indigenous as well as imported materials are covered under the scheme. This helps MSMEs improve product quality.

Benefits of the Scheme

  • Facilitating procurement of Raw Material with credit support up to 180 days
  • MSMEs helped to avail Economics of Purchases like bulk purchase, cash discount etc.

The Process

  1. Duly filled application form is to be submitted along with the Application
  2. Preliminary appraisal and Unit inspection is carried out by NSIC.
  3. Sanction of Limit to the Unit.
  4. Signing of agreement between NSIC and Unit.
  5. Disbursement of assistance to the unit.

Eligibility: Entrepreneurs of micro, small and medium scale industries having Udyog Aadhar are eligible.

Funding: MSMEs are helped to avail cash discounts and bulk purchases. The financial assistance is up to 180 days. The rate of interest varies based on type of industry (Micro/small/ Medium) and the outstanding dues over specified number of days.

More Info: https://nsic.co.in/Schemes/Raw-Material-Against-BG.aspx

6. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

The aim of the scheme is to organize Traditional Industries and Artisans into clusters and to provide sustainable employment, enhance marketability of products and to equip them with improved skills, better tools and facilities.

Objective of the Scheme

  1. To organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability
  2. To provide sustained employment for traditional Industry artisans and rural entrepreneurs
  3. To enhance marketability of products of clusters by providing support for new products, design intervention and improved packaging, and also the improvement of marketing Infrastructure
  4. To equip traditional artisans of the associated clusters with improved skills and capabilities through training and exposure visits
  5. To make provision for common facilities and improved tools and equipment for artisans
  6. To strengthen the cluster governance systems with the active participation of the stakeholders, so that they are able to gauge the emerging challenges and opportunities and respond to them in a coherent manner
  7. To build innovative and traditional skills, improved technologies, advanced processes, market intelligence and new models of public-private partnerships, so as to gradually replicate similar models of cluster- based regenerated traditional Industries

Eligibility: NGOs, Government or semi-Government bodies, and Panchayat Raj institutions can avail the scheme for cluster improvement.

Funding: The financial assistance provided for any specific project shall be subject to a maximum of 8 crore INR to support Soft, Hard and Thematic interventions.

More Info:https://msme.gov.in/scheme-fund-regeneration-traditional-industries

7. ASPIRE Scheme

A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE) is an initiative of Government of India and promoted by the Ministry of Micro, Small and Medium Enterprises (MSME). It was launched to set up incubation centres and network of technology centres for enhancing entrepreneurship across India. It seeks to promote start-ups for innovation in the agro-industry.

The scheme is introduced with the aim of promotion of innovation in rural industry and entrepreneurship. It was launched with aspiration to:

  • Set up a network of technology centres
  • Promote startups for innovation
  • Entrepreneurship in agriculture industry. This incentive is referred to as Fund of Funds.

Objectives of ASPIRE Scheme

  1. Creation of new jobs and reducing unemployment
  2. Grassroots economic development at the district level
  3. Promoting entrepreneurship culture in India
  4. Facilitating innovative business solutions for meeting the social needs of the people
  5. Promoting innovation for further strengthening the competitiveness in the MSME sector

Eligibility: MSMEs

Funding: The fund will be used for automation of agricultural practices, value addition to agriculture and forest produce, recycling of agricultural waste and to introduce business models for local rural employment. Fund of Funds will be maintained by SIDBI with a corpus of 60 crore INR.

More info: https://www.msmehelpline.com/aspire.php

8. Infrastructure Development Program- Cluster Development Programme

This scheme is launched to create and upgrade infrastructural facilities in the new and existing industrial areas and clusters of MSEs, to set up common facility centres, expand build capacity of MSMEs by forming self-help groups, consortia and to support sustainability by improving skills, market and capital. The Ministry of Micro, Small and Medium Enterprises (MSME), Government of India (GoI) has adopted the cluster development approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs) and their collectives in the country. A cluster is a group of enterprises located within an identifiable and as far as practicable, contiguous area and producing same/similar products/services. The essential characteristics of enterprises in a cluster are (a) Similarity or complementarity in the methods of production, quality control and testing, energy consumption, pollution control, etc (b) Similar level of technology and marketing strategies/practices (c) Channels for communication among the members of the cluster (d) Common challenges and opportunities.

Objectives

  1. To support the sustainability and growth of MSEs by addressing common issues such as improvement of technology, skills and quality, market access, access to capital, etc.
  2. To build capacity of MSEs for common supportive action through formation of self help groups, consortia, upgradation of associations, etc.
  3. To create/upgrade infrastructural facilities in the new/existing industrial areas/ clusters of MSEs.
  4. To set up common facility centres (for testing, training centre, raw material depot, effluent treatment, complementing production processes, etc).

Eligibility: MSMEs

Funding: Financial Assistance under various categories are:

  • Maximum 2.5 lakh INR for preparation of diagnostic study report with GoI
  • Maximum 5 lakh INR for preparation of technical feasibility and viability project report
  • For a project of 25 Lakh INR in every cluster, grant of 75% of sanctioned amount

More info: https://msme.gov.in/schemes/infrastructure-development-program

9. Market Development Assistance (MDA)

Export Promotion continues to be a major thrust area for the Government. In view of the prevailing macro economic situation with emphasis on exports and to facilitate various measures being undertaken to stimulate and diversify the country’s export trade, Marketing Development Assistance (MDA) Scheme is under operation through the Department of Commerce  to support the under mentioned activities:

  1. Assist exporters for export promotion activities abroad
  2. Assist Export Promotion Councils(EPCs) to undertake export promotion activities for their product(s) and commodities ;
  3. Assist approved organization/trade bodies in undertaking exclusive nonrecurring innovative activities connected with export promotion efforts for their members ;
  4. Assist Focus export promotion programmes in specific regions abroad like FOCUS (LAC), Focus (Africa), Focus (CIS) and Focus (ASEAN +2) programmes ; and
  5. Residual essential activities connected with marketing promotion efforts abroad.

The aim of this scheme is to increase participation of representatives of participating units. It has three forms:

  • Participation in international exhibitions and fairs
  • Financial assistance for using Global Barcode standard (GS1) 3. Recognised importance of barcoding and financial assistance through DC.

Eligibility: MSMEs

Funding: The scheme offers funding up to 75% in respect of air fare for participation by MSME entrepreneurs in overseas fairs/trade delegations. The scheme also has provision of funding for producing publicity material (up to 25% of costs), sector specific studies (up to 2 lakh INR) and for contesting anti-dumping cases (50% up to 1 lakh INR)-for individual MSMEs & associations.

More Infohttps://my.msme.gov.in/MyMsmeMob/MsmeScheme/Pages/0_2_5.html

10.  National Awards (Individual MSES)

The ministry selects from among enterprises and entrepreneurs, recognising their efforts and contributions to MSMEs. The MSME must be in continuous production or in service for the last four years.

Scheme Highlights

  1. Selected Natioanl awardee is facilitated with cash prize of INR 1 Lakh, INR 0.75 Lakh , INR 0.50 Lakh in order of ranking
  2. Special National Award for women – cash prize of INR 1lakh
  3. Special National Award for SC/ ST Entrepreneur- cash prize of INR 1lakh
  4. Special National Award to NER Entrepreneur- cash prize of INR 1lakh
  5. Special Recognition Award to MSMEs scoring marks above 80% and 50% in case of NER- cash prize of INR 0.20 lakh

Eligibility: Entrepreneurs of MSMEs having permanent registration number or have filed Entrepreneurs Memorandum to respective authorities. MSME should have been in continuous production since last four years.

Funding: Benefits in the form of cash is awarded to the winners. MSMEs from different categories like women entrepreneurs, SC/ST category, NER Entrepreneurs are selected for the award. Cash prize up to 1 lakh INR is awarded to winners.

Process and Required Documents

Eligible enterprises may send nominations in the prescribed proforma (may download from the Ministry of MSME website) to Director, MSME-DI of the state where their MSME is registered/they have filed Entrepreneurs’ Memorandum (EM).

More info:https://www.Startupindia.gov.in/content/sih/en/government-schemes/national_awards_for_mse.html

Top 5 Business Loans for Startups 2021

Business loans are designed to help small businesses and entrepreneurs meet their capital requirements. There are over 30+ banks and financial institutions in the country that offer tailor-made business loans at attractive interest rates to suit your financial requirements.

One can take business loan to start a new project, expand the current business to a new location, and buy new equipment, purchase office space and assets. With the current state of business financing, it can be harder than usual to get a business loan. Fortunately, few lenders still seem to be going strong, and some of them let you use your loan for business reasons. So if the brands in this guide don’t work for you, consider a personal loan instead.

Things to keep in mind when looking to apply for a Startup Business Loan

  1. Startups looking to get such a loan should ensure the following:
  2. Make a crisp and detailed business plan. 
  3. State clearly how you intend to use the loan amount in your business plan.
  4. Summarise the objectives and goals of the business along with a chart that will highlight the potential returns and growth of the venture. 
  5. Give a clear approximation of the funds. 

Eligibility Criteria for Startup Business Loan

  • The eligibility criteria to avail startup business loans may vary from lender to lender but the generic ones have been listed below:
  • Age of the applicant should not be less than 21 years while the maximum age should not exceed 65 years.
  • The applicant must be a citizen of India.
  • Applicants should have a business plan.

1. Omozing.com

Omozing helps make Smart Money Moves for a Lifetime. They strive to get lowest interest rates and best terms for your Online Applications at www.Omozing.com . Currently, we are offering

  • Short Term Loans for working capital needs
  • Medium Term Loans for various business needs

Business Loans based on the following:

  1. Unsecured Working Capital Loan
  2. Microloans
  3. Invoice Discounting
  4. GST Surrogate
  5. Revenue Based Finance
  6. Banking Surrogate

Documents Required

  1. GST Registration Certificate
  2. PAN Card and Partnership deed
  3. (Applicable if partnership company)
  4. Office Address Proof
  5. (Utility Bills for Telephone, Electricity, GST Registration Certificate OR  Bank Statement)
  6. Income Tax returns of the last 2 Years

along with ITR Saral Copy, Computation of income statement, Balance sheet, P&L, 3 CA , 3 CD Audit reports along with all schedules.

2. IIFL Business Loan

IIFL offers Business Loan starting at interest rate of 16.00%. The rates vary by loan amount, occupation and type of loan availed. IIFL offers multiple business loan products for self-employed professionals and non-professionals at low rates. Below-mentioned are the details of the business loan IIFL.

Benefits

  1. The lender offers flexible repayment options.
  2. Minimum documentation is required to apply for this loan.
  3. IIFL verifies your loan application and approves the application in a timely manner.
  4. Individuals looking to avail the SME Loan from IIFL do not have to submit any collateral to the lender.

Internal Charges

  • Late payment charges: 2% per month on the loan amount that is overdue.
  • ECS/PDC/ACH dishonour charges: Rs.500 for each instance
  • ECS/PDC/ACH swapping charges: Rs.500 for each instance
  • Stamp duty: As per the laws of the state

3. Lendingkart Business Loan

Lendingkart Finance Limited is a non-deposit taking NBFC providing working capital loans and business loans to SMEs across India. We give you access to capital in a completely online quick process with minimum documents and no collateral needed.

We hope to become your partner in laying a strong foundation for your businesses and helping it grow to its full potential.

Benefits of Business Loan by Lendingkart

Business loans from Lendingkart are enabling you to redraw your business strategies for matching today’s agile work environments. Here are the benefits of taking a business loan from an NBFC like Lendingkart.

  • Faster processing:
  • Preserving your ownership:
  • Streamlines your cash flow:
  • Improve your credit score:

Features of Lendingkart Business Loan

  1. Get Business Loans up to ₹ 2 Crore
  2. Superfast Business Loan Processing
  3. Fast Turnaround Time and Disbursals
  4. No collateral required
  5. Fair interest rates
  6. Extended Loan Tenure
  7. No Hidden Costs
  8. Flexible Repayments

4. Fullerton India

Fullerton India understands that each business has unique financial needs. We take great pride and effort in ensuring that business owners and entrepreneurs meet their business goals by offering them the best possible financial solutions. We work hard in ensuring customer convenience so that you can focus on growing your business while leaving the financial aspects to us. To this end, we have designed an end to end digital process so that you can apply for a business loan from the convenience of your home, anytime and anywhere. 

Key highlights

  • Loans of up to Rs.50 lakh.
  • Repayment tenures of up to 5 years.
  • The processing fee charged can go up to 6.5% of the loan amount plus GST.

Startup business loans are of two types –

  • Line of Credit
  • Equipment Financing.

Benefits

  1. The lender offers four types of business loans: Business Loan, Business Loan for Women, Business Loan for Doctors, and Business Loan for Chartered Accountants. Each of these schemes has unique features and benefits.
  2. Fullerton India’s Business Loan can be availed by business owners for any business funding requirements that may have risen.
  3. The Business Loan for Women is a unique loan product that has specially been designed to cater to the financial needs of women entrepreneurs.
  4. The Business Loan for Doctors is a loan scheme that is designed for doctors who are in need of funds to either open their own clinic or upgrade an existing clinic. You can also apply for this loan if you are looking to purchase new medical equipment, hire more staff, etc.
  5. The lender’s Business Loan for Chartered Accountants is a loan scheme that can be availed by chartered accountants who require additional capital to expand their operations.
  6. Applicants need not hypothecate their assets to avail this loan.
  7. All loans will be disbursed in a timely manner.

5. Tata Capital Business Loan

Tata Capital business loan is an unsecured credit you can avail to meet your growing business’s urgent requirements. Business loans allow you to usher in funds for your enterprise to expand your existing business, boost production, take your operations online, buy new machinery, and more. The quick infusion of cash through business finance enables you to make necessary purchases and payments on time ensuring smooth business functioning.  

Key highlights

  • Repayment tenures of up to 3 years
  • Loans ranging between Rs.50,000 and Rs.75 lakh.
  • Processing fee of 2.75% of the loan amount plus GST will be charged by the lender.

Benefits

  • The lender offers business loans with flexible terms. Thus, these loans can be customised to meet the borrower’s exact requirements.
  • The lender gives borrowers the option of customising their monthly EMI payments.
  • No security needs to be provided to avail this loan.
  • Individuals between 25 years and 65 years of age can avail this loan.

Internal Charges

  • PDC charges: Rs.850
  • Bounce charges: Rs.450
  • Cancellation charges: 2% of the borrowed loan amount or Rs.5,750, based on whichever is the lower of the two
  • Duplicate NOC: Rs.550
  • Swapping charges: Rs.600
  • Fore-closure charges: 5% of the outstanding loan amount plus GST