“I see startups, technology and innovation as exciting and effective instruments for India’s transformation.” ~ Narendra Modi, Prime Minister of India
INR 10,000 Cr! INR 18 Lakh!
So, what are these numbers? Under Narendra Modi’s ‘Start up India, Stand Up India’ initiative, while the former number indicates the INR 10,000 Cr that has been allocated under the Fund of Funds for startups, the latter is the number of jobs that are expected to be generated over the next five years. This is how significant the startup ecosystem is gradually developing into, for the economy of this nation.
Whilst the numbers are substantial, here’s the snag.
In a recent event organised by the World Economic Forum, the Indian Government, has admitted that disbursement of funds via this special scheme has been awfully sluggish.
Only 600 startups have been funded for a total amount of INR 1,100 Cr out of the whopping INR 10,000 Cr corpus. Now, why is that?
“As an entrepreneur, mentor and advisor myself, while there may be plentiful resources available from the government, start-ups and SMEs are unaware of them. For them (a) the information is too complex and (b) they feel the process is too stringent.”
Why Government Funds Are A Better Option
VCs are reliant on individuals or international banks to pool in money, form a corpus and then disburse the money. Additionally VCs only fund tech, product based companies.
Why shouldn’t all have access to the funds? Why should just a handful get money because they have access to VC funds?
On the other hand banks are also a great alternative because they are less invasive than VCs. Because they are backed by the government, chances of getting loan based on your credit history increases multi-fold. Finally, in the case of loan from banks, they do not ask for stake. All you have to do is pay the principal amount back plus the interest. Thus, raising money from banks is a great choice.
Furthermore, getting collateral free loans has also become easy, thanks to the various government schemes and funding options. These funds can be game-changers for entrepreneurs in India, who are stuck at approvals because the current rules and regulations are strict in giving out loans for un-established businesses.
Startups need money to expand, and banks/financial institutions provide loans only to established businesses with proven track record of generating revenues; and the vicious cycle continues.
Here Are A Few Uncollateralized Funding Options For Startups
Startup India plan: A government of India initiative exclusively for startups. The portal encompasses information with regards to various benefits being offered like funding and credit guarantee support, tax exemptions on capital gains for three years and on investments over fair market value.
SIDBI Growth Capital and Equity Assistance: The funds can be used for marketing, brand building, creation of distribution network, technical know how, R&D, and software purchase.
SIDBI Revolving Fund for Technology Innovation (SRIJAN Scheme): This plan provides financial assistance to MSMEs towards development, upscaling etc.
Lean Manufacturing Scheme for MSMEs: This plan helps to enhance the manufacturing competitiveness of micro, small and medium enterprises (MSMEs) by applying lean techniques to identify and eliminate waste in the manufacturing process.
Credit Linked Capital Subsidy Scheme (CLCSS): This scheme is for technology upgradation of Micro and Small Enterprises for purchase of plant & machinery.
No matter what the size of your business or your dreams, when you have access to the right kind of funding, flying off to a great start can be cake walk. Good Luck!
