India is a vast country which has made giant strides in every sphere of life. Most Indians have access to education, and this is evident from the huge number of graduates from every discipline being churned out by the universities every year. This has resulted in the job market squeeze resulting is unhealthy completion. It is this that has led the enterprising youth get attracted to business ventures to showcase their entrepreneurial skills and project their ideas profitably rather being confined to 9 to 5 jobs.
Reasons to start a small business:
It is pertinent to ask what makes small business a viable option by giving wings to one’s idea. There is ample logic for which it has an attraction among the youth.
- The number of startups in India is the third largest in the world.
- Licensing and registration have been simplified and faster.
- Various options for sourcing capital and funds.
- The taboo towards the business community has waned and the profession is considered respectable.
With such an array of pros, the other factors that count in the success of a business venture are determination, and astute harnessing of your abilities and resources.
A Plan for Starting Small Business in India:
The key to setting up a business venture is the drawing up of a business plan. It is a compilation of several documents that details various aspects of the business including its objectives and the road map that shall lead it to a decent outcome. Obviously, the business plan will comprise several elements to help your lender extend suitable business loan to you as and when required. Let us see what the elements are:
- Mission Document: A statement that enumerates the objectives and aim of the business.
- Vision Document: The statement describes how the business proposes to achieve its objectives.
- Budget and Investment: It is best prepared by an expert who can define the financials of the business and the probable source for the funds.
- ROI – Return on Investment: It is crucial for lenders and investors to get interested in your business project. It projects if the investment will yield profit as cover for the finance.
- Marketing Plan: It is a statement that defines the marketing and business strategy proposed to be adopted to get the customers interested in your product.
- Publicity Proposal: Advertisement is an important tool to announce the launch of your business and your products. A strategy involving all the media including social is a potent tool.
- Distribution Plan: You must document the ways by which your products and services will reach the target audience.
- Prospects: It defines the expansion projections and plans for added revenue generation.
- Key Players: It is a list of the promoters and their roles and responsibilities.
Legalize your small business:
Before starting small business in India, you must get your paperwork in order. Different registration and appropriate licenses shall provide your business with legal cover. Ownership registration is the first step:
- One Person Company (OPC)
- Private Limited Company
- Limited Liability Company
Funding Small Business in India:
With a comprehensive business plan in hand, you are will be able to look for finance to launch and run your business. The possible fund sources are:
- Self, family and friends.
- Venture Capital
- Angel investor
In the loans scenario in the country, every source has its pitfalls. The popular lenders are banks, but the process is elaborate and their stringent regulations and procedures act as a deterrent in landing a suitable small business loan in India. Of late, Fintechs have become popular by dint of their innovative and tailored products to the benefit of entrepreneurs even for starting small business.
Eligibility Criteria for Small Business Loan in India:
- You can be any of the ownership entity discussed.
- The business should be operational for specified periods other than startup.
- The nature of business activity and the location should not appear in the prohibited or the negative list.
- Charitable Institutions, Trust, and NGOs do not come under the purview of business loans.
Documents required for starting small business:
While banks insist on elaborate documentation, Fintechs ask for bare essentials as they rely heavily in the modern business analytics.
However, the minimum summary of documents is:
|KYC||Valid ID and Address Proof|
|PAN card of the Promoter and Business|
|Aadhaar card of the Promoter|
|Registrations and Licenses||Business Registration|
|All-important licenses based on business activity|
|Partnership Deed / Articles of Association|
|Memorandum of Association for Partnership|
|Financial Statements and Report||As specified by the lender|
|Credit score||CIBIL or any other rating agency acceptable to the lender.|
Apart from the list of documents, you may be required to produce few more from the local authorities and it may vary depending on the location. However, opening a bank account is imperative. The account can be opened in any scheduled commercial bank both in the public or private sector in the name of the company to act as a business account. Generally Current Account is opened for use as business account.