There are a few people for whom starting a business is like going to a store and placing an order for a bunch of equipment, wealth has a way of making things easy. If you’re one of these people, consider yourself privileged and feel free to skip this blog.
For the rest of us, one of the biggest challenges with starting a business is to procure the initial money required to source the equipment and start up your own business.
There are many different ways that one can go about getting some funding and we will discuss a few of those in the topics to come.
The first place that everyone can think of is going to the bank with your business plan and asking them for a loan, but this might not be as easy as you think.
Statistically, there are a lot of businesses that shut down within the first few years of opening, which is why the first thing that the bank will ask you when you’re shopping for a loan is the collateral that you can offer. Someone who just started may not have access to any property they own or any swanky investment portfolio that they can use as collateral which is why they often fall into traps with banks that offer extremely high-interest rates which makes it harder for the business to survive.
Be extremely careful and know the industry norms with loans before you go ahead and finalize a loan with a bank.
There are a few Government schemes in India that you can take advantage of, which offer loans at really attractive rates. I’ll list down some of these schemes that I’ve come across during my research.
1. MSME Loans
3. SBI Simplified Small Business Loans
These schemes keep getting updated every few years, so be on the lookout for which ones will be relevant to you moving forward.
If you find it hard to get a loan from all of the above options, you can try your luck at a Co-operative bank which has far lesser scrutiny and requirements for loans.
Getting a Partner
If you don’t feel comfortable getting a loan yourself and you feel that getting a loan might make it harder for you to run the business, you should consider getting a partner on board. Hopefully, the two of you together can pool enough resources without having to go to a bank or any third party for a loan. It’s always better to have someone running the business with you when you’re starting and you now have double the number of resources you would need to start the business
Working with a partner might not always be the best idea if the two of you have opposite ways of running a business. Know the person you plan on working with well before diving into a business only to realize that you two don’t work well together.
When you’re looking for a partner, look for someone from a different domain like you. Say for example if you’re an engineer, look for a partner who’s a composer and you’d soon find that having another person who can bring a different skill to the table brings up the value of the business entirely. Say if two engineers start a business, the only services they can provide are Audio Engineering services, whereas, with a Composer, you can dive into a whole new range of services like composing for ads, films, and commercials. This also helps with defining clear job roles in the partnership and avoids any clashes.
Finding the right person to start a business with
Like I said previously, look for someone outside your domain to add another dimension to your business. If you’re musical, look for someone like a lawyer, accountant, or even a marketer i.e someone from a straighter profession. Sometimes the people that would make a good partner are staring you right in the face.
Apart from all the above options, you also have the option to look for an Angel Investor who will be willing to invest in the business and own a percentage of the profits but won’t be involved in the daily running of the business. I recommend going down this path if you’re not comfortable working with a partner.
Registering a Business
Once you have decided what way you’re going to start this business, registering this business is the next step that you should take. There are three main options available to you:
1. OPC (One Person Company)
This is the best option for someone who wants to start their business alone and also the option with the least amount of compliances.
2. LLP (Limited Liability Partnership)
A separate legal entity, in an LLP the liabilities of partners are only limited only to their agreed contribution.
3. Private Limited Company (PLC)
A company in the eyes of the law is regarded as a separate legal entity from its founders. It has shareholders (stakeholders) and directors (company officers). Each individual is regarded as an employee of the company.