Starting a start-up in India
India is a lucrative hotspot for foreign investments, doing small and big business within the country and enhanced networking with international conglomerates. India is instrumental in offering a favourable business ecosystem to anyone who is interested to explore the Indian Market and offers growth opportunities encompassing development friendly reforms at a granular level. India is a liberalised economy with a spike in business-friendly policies along with reduced tariffs and taxes.
The mega economic activity initiated by the government of India “Make In India” is a boon in business opportunities for Indian markets leading to a boost in economic growth for the country and a fair & stable environment for future entrepreneurs
How to Start a New Small Business
There is a series of steps and procedures that one needs to follow to start a new business which are duly authorised by the Government of corporate affairs and as per the laws and procedures:
|Sr. No.||Steps and Procedures||Approximate time taken||Approximate Cost involved|
|1||To obtain DIN (Director Identification Number)||1 day||Rs. 100|
|2||To obtain a certificate of digital certificate (can be online)||3 days||Rs. 1500|
|3||Think of a unique name of the business and reserve it with the ROC – Registrar of companies||2||Rs. 500|
|4||Duly stamp and sign the company documents||1||Rs. 1300 (including AOA on share capital)|
|5||To obtain the certificate of Incorporation from ROC and the ministry||5||Rs. 14000 – 14500|
|6||Make a private seal of the business||1||Rs. 350 – 400 (depends on number of seals to be made)|
|7||Obtain a PAN – Permanent Account Number in the name of the new venture||A week||Rs. 65 – 70|
|8||Obtain a TAN – Tax Account Number||Week||Rs. 57 – 60|
|9||Register the business with the state and municipal under the office of inspectors, shops and establishment act.||2||Rs. 6500|
|10||Register VAT – Value added Tax||12||Rs. 5100 including stamp duty|
|11||Register for Profession Tax||2||Free|
|12||Register with EPFO – Employees’ Provident Fund Organisation||12||Free|
|13||Register for medical insurance||9||Free|
Features and Benefits of starting a small business:
To execute growth and development of oneself and the economy of the country, expansion strategies and innovating techniques need to be judicially conducted to obtain and retain maximum benefits out of a small business. It is not as difficult as it used to be. Having an own business in India means:
- Higher Economic and Financial Growth
India’s economy thrives to be among the top three positions in the world with its increasing rate of GDP at the rate of 7-8% per annum. With the economy, individuals are growing too at an exceptional rate. So, a start-up small business can generate revenue, profits, sustainability, better standard of living, and eventually holistic growth and development of the entrepreneur.
- Ease and Comfort of doing a business.
The markets of India are customer centric and empathetic towards the seller needs and comforts. It is a service-oriented arena with conducive tax and tariff regulations, fair policies and a free political system.
- Sustainable business prospects.
India offers a scope for suitability in doing small business, with more population from the rural area moving towards urban areas and thus growing from the BPL to middle class avenues. With large developmental, organisational, and infrastructural plans lined up in big and small cities in India, it’s economy can sustainablystand on a pinnacle.
- Active workforce and organised employability
The average age of workforce in India is 27.6 years which is beneficial for the Indian market as it gives more service years to the employee. Workforce is stepping beyond agricultural and industrial norms and business is taking full advantage of given the opportunity to generate employment and enhance productivity. Reduced labour cost also benefits a new business with low capital investment.
- Start-up ecosystem and friendly laws
Laws and procedures of India are such that not onlyresidents, but even international investors consider the boomingmarket to invest because of its flexible and lenient laws of privatisation. In recent changes in the bill, taxes, norms, laws, effective implementation, and efficiency ensures easy movement of products, sale, and purchase and solves the objective of justice and overall development of the country. The start up ecosystem comprises businesses like financial services, e-commerce, scientific and educational good and services and technology.
- Exploding Markets and Lower operational costs
There is an extensive range of business opportunities available in the Indian Market in every sector – be it electronics, technology, medicine, education, infrastructure, and other small business. The top-notch and high-end facilities in communication, technology, and transportation enhance the business arena of India and create easy options for a newbie to enter the Indian Market. Operational costs of basic amenities like investing in land, labour, food, internet, and taxes are reasonable and easily affordable.
- Easy Availability of Finances to start a new venture.
Micro, small and medium size businesses are vital to enhance India’s economy and is the backbone contributing to almost 48% of the GDP. Capitalisations, incentives, tax benefits, loan facilities, marketing opportunities, and above all, financing backing and options are readily available on a large scale to promote small business finance and help innovative entrepreneurs contribute to the development of India.
Ways to Finance Small Business
The most crucial factor in starting a new business whether small or big is finance. The entrepreneur needs to devise ways for a business loan to initialise his new business. There are several options that an entrepreneur has to start a small business of his own.
The most common options along with their pros and cons are as follows:
Self – Funding
The easiest and most reliable way of financing a self-owned business is to fund it on your own. There are strings attached and the businessman is not bound to restrictions and can get his way in everything. He is the deciding factor and he can use his savings or investments in starting a new business.
- It is simple, convenient, quick, and safe
- No approvals or permissions are required
- No complexities of adding other partners and taking their permission for everything
- Profits and capital earned goes only to the entrepreneur
- It is as easy to exit the business if he feels to start something else
- Limited resources
- Limited growth
- Like profits, the entire loss is also to be borne by the entrepreneur
- The entrepreneur may need skills, talents, knowledge, and experience of others also as he may alone not be enough to run the business
Friends and Family
This type of funding is generally short terms and is on a personal level. The entrepreneur needs to return the money in the stipulated time as promised and generally there is no interest charged on it. It is completely given out of relationship bonding, credibility, and goodwill of the individual.
- Flexible Funding
- No Interest charged and no collateral required
- Flexible time of repayment
- No documentation required
- Any misunderstanding or a delay can damage relationships
- Since no documentation is required the relative can demand his money back whenever he needs it without giving much time
- There could be interference by them as they have invested so they might take it as their right
- Word of mouth of the loan offered can hamper goodwill in future
Relying on Angel Investors and Crowdfunding
There could be one investor or multiple investors to join hands in investing in the small business finance in return of equity in the company. The amount invested is not very big, but they have a proper say in the running of the business. The role of an angel investor could be quite profitable for the owner, but it also means losing your stake to him. Angel investors could be relatives, friends, wealthy people, other businessmen, groups or crowdfunding like an online group of people who fund and run a small business at the backend.
- Low risk of business financing
- In case of failure of business this amount need not be returned
- It is a long-term view
- It is an opportunity for them as well
- Losing control over the business
- Profit sharing can be made
- There could be burdening of relationship and poor withdrawal when the time comes
- Strained relationships
This is a wonderful way to raise funds by the individual himself and utilise the profits as working capital to improve the business further. The entire decision-making onus lies on the entrepreneur and he has complete control over his small business.
- Greater focus on the business
- Complete control over all aspects of managing it
- Be customer-centric only and work on increasing the profits
- Undivided attention given to the product, its marketing and selling
- Saves on the interest
- Lack of time and too much in hand
- No support from investors.
- Risk factor
- Cash flow may dry up and it can get difficult to run the business
This is high end version of angel investors. But they invest a huge amount of money in the new business giving a longer period of time to return. But they also have a large equity share in the business with a huge amount of say in all affairs.
- Financing issue resolved
- Huge capital and long term is availed
- Good connections and benefit of heir skills, experience and expertise is beneficial in the klong run
- Better and faster achieving of objectives
- Divided control and interference
- Spending and utilising profits can be controversial
- Attention problem
- Lack of guidance
Banks and NBFCs
This is a traditional and one of the most important ways to raise fund for a family. In this case, the entire ownership stays with the entrepreneur and has his small business finance after paying an amount of interest to the bank and NBFCs. This contemporary method of financing is still popular and many people depend on it. The entrepreneur needs to be ready with his small business loan plan and in a series of verifications, the banks and NBFCs decide to give out the loan as per their terms and conditions.
- Easy provisions of small business loan and other facilitates
- Banks/NBFCs give Wealth management options given and managing portfolios
- Banks/NBFCs Can underwrite stocks and shares
- Banks/NBFCs are the largest propellers of business finance but also the last resort taken
- Us of modern methods, technology and easy documentation has made the process quite simple
- Heavy documentation required.
- Rate of interest can be high as per the product chosen
- The amount required is not complete approved there could be a percentage withdrawn.
- Fixed time period and the failure to abide by it can ruin one’s goodwill, credibility and credit score.
- It is not very easy to raise a bank or NBFC small business loan
Online sources of finance
There are times when it gets difficult to get a loan for small business finance from Banks and NBFCs. In such cases a group of lenders have created a forum online, are more like NBFCs and lend loans for small business. The application method is simple and easy but there could be trust and interest issues.
- Easy and simple processing of small business loan
- Ease of online applicationand online documentation
- 24*7 accessibility and availability
- Convenient comparison of several offers online
- Higher rates of interest as compared to banks and NBFCs
- Trust issues, since online lending is a new platform so they can just go out of business on day
- Judging and verifying he goodwill and credibility of the online lender could be tiresome and difficult