Angel Investors Network To Breathe In New Life Into Your Business - List Of Networks

Angel Investors Network To Breathe In New Life Into Your Business – List Of Networks

Today, there are about 3000 angel investors and networks that are active in the industry of investment all over the world. India is quite at the early stage of this industry is progressing like anything. There are more than 500 angel investors who make multiple investments all around the year in the country. The eminent personality, Dr, Apoorv Ranjan Sharma who is the co-founder of the group of Venture Catalysts recommends the investment industry in India to get organised at a rapid speed. This can support the various start-up companies that are getting opened every now and then in the country.

The role of funding is so much important whenever you think about starting a new business or venture. The correct type of funding can create magic for the entrepreneur and help in the long survival of the venture. This is where the angel investors come into the picture. They come as angels in the lives of the small companies and protect them via small investments. In return, they only keep small stakes in start-up companies. However, the start-up companies must always choose the correct type of investors keeping in mind the kind of business that they are running.

To support several growing companies in India there is a long list of angel networks that help the new companies to begin their journey towards prosperity and growth.

The List Of Top Angel Investors And Networks In The Country:

Indian Angel Network:

Angel Investors

The company got started in the year 2006 by the famous personality named Alok Mittal. It not just offers funding to the entrepreneurs or beginners in the field of business but also offers them with constant mentoring. This high-quality support and huge network facility offered by the company help businesses to survive under intense competition and challenges. The experts of the company also frame valuable strategies of success for the start-ups and ensure proper execution of the same. The network of the company has more than 450 investors spanning to almost 10 countries all over the globe. Some of the start-ups funded by the company include:

  • FabAlley
  • WOW! Momo
  • PrettySecrets
  • Process9
  • Get My Parking
  • WedMeGood
  • Go Coop
  • SuperProfs
  • Box8

The sectors in the industry that the company prefers funding comprise mainly only telecom, animation and gaming, healthcare, manufacturing, technology, retail, cloud computing, entertainment and media, IT, etc. They prefer investing in the start-up sectors that have proper business models, a management complementary team, and a proposition having differentiated value.

Chennai Angels:

Chennai Angels has the strongest network of about 94 investors who mentor and nurture the new entrepreneurs. They are in this business since the year 2007. Their funding in start-up companies exceeds almost 50 Crores. Some of the popular start-up companies that they got funded include Ketto, Cloudcherry, BetaOut, Schoolmate.in, Ragtagger Lifestyle, SP Robotic Works, etc. They mainly focus on funding in the companies involved in the fields of e-commerce and education.

Venture Catalysts:

The co-founders involved in the starting of this investment company include eminent people like Anil Jain, Gaurav Jain, Apoorv Ranjan Sharma, and Anuj Golecha. It is the company that got launched as India’s first ever Seed Investment and Innovation platform. The company offers a boost to the start-ups during the early stages of their inceptions so that they have a bright future to go ahead. The sectors funded by Venture Catalysts comprise mainly of artificial intelligence, education, retail, e-commerce, ad tech, etc. Some of the successful start-ups funded by them include:

  • Beardo
  • ConfirmTkt
  • vPhrase
  • SIFTR
  • LenDen Club
  • Innov8

Interested entrepreneurs who are looking for reliable funding can contact the professionals here at komal.shah@venturecatalysts.in.

Mumbai Angels:

Yet another name in the list of angel investors who cater to the growth and expansion of the non-profit seeking organisations in India. If you are a start-up and aiming to apply for funds at this company, then ensure that you have defensible service or technology, strong team, well-defined products to show the market plans. The members associated with Mumbai Angels have huge expertise in the field of investment. They have the experience of dealing with several types of companies since the year 2006 and thus can guide the new entrepreneurs in the correct direction.

Mumbai Angels

The founders Prashant Choksey and Praveen Chakravarty mainly focus funding on industries like:

  • Business Process Outsourcing
  • IT
  • Pharmaceutical and Biotech
  • Retail
  • Entertainment and media
  • Telecommunication and internet

The start-ups like Bookeventz, Gingercrush, Inmobi, Purplle, NowFloats, Myntra, Fitpass, Azuro.in, Betaout and many others have got benefitted from Mumbai Angels. The deal sizes of the company range between 50 to 200 lakhs INR. Several individuals having high-value net worth are still associated with the company. You may contact the experts here at contact@mumbaiangels.com to discuss business plans and investments.

Calcutta Angels:

The founders Pradyumna Dalmia, Kumar Patodia, Rahul Kayan, Raghav Kanoria, and Apurva Salarpuria starting this investment network in the year 2013. The main goal of the company is to guide and capitalise the start-ups in the market. They also help the companies to grow financially via effective mentoring, networking, and education. The criteria that they have for the start-ups to fund them comprise of innovation, quality team, financial visibility, competitiveness, and market size. So, if your company is having all the above qualities then do contact the experts here at info@calcutta-angels.com for the best guidance.

Calcutta Angels

The start-ups funded by the company include Catapoolt, Ketto, Logic Roots, tabsqaure, roder.in and several others.

Lead Angels Network:

This one is the country’s first private-owned investment network that got founded by the team of three people named C Amarnath, Sushanto Mitra, and Bipin Kumar. They all belong from the IIT Bombay and started Lead Angels in the year 2013. Their main aim of starting this company was to improve the outcome of investment in the early stages of the companies. The company has qualified and experienced executives who are excellent support for it. They are passionate and dedicated to the field that they work in. Not just new entrepreneurs, the company also works to support several investors in India.

Lead Angels Network

Lead Angels alone have the capacity of funding companies to the extent of 100 to 150 lakhs INR. However, they also work in a company with the other angel networks to fund businesses which require more than 300lakhs investments. You can contact the professionals and executives of the company for further funding details by dropping emails at info@leadangels.in.

Chandigarh Angels Network:

Chandigarh Angels Network comprises of the community of several successful entrepreneurs who are today angel investors of the country. They love supporting promising businesses in India and help them reach new heights using their own expertise and skills. The professionals associated with the company carry out their work with a lot of passion and commitment. They have about 37 investors in their network at present and have already funded more than 8 start-ups. The experts also mentor several start-up companies to scale high in the market.

Chandigarh Angels Network

The company’s investment depends on the type of start-up and accordingly the amount ranges between 10 lakhs to 2 cores INR. Some of the popular companies that they extend their support to include Done Thing, The Gourmet Jar, JumboBasket, YoloHealth, HealersAtHome, Biryani By Kilo, etc. The interested entrepreneurs can explore the website of the company to gather further details about the funding services offered by it.

Hyderabad Angels:

Hyderabad Angels

Hyderabad Angels got founded in the year 2012 to deal with investments at the early and seed stages of the companies. The members of the company are business leaders, entrepreneurs and venture capitalists who are extremely knowledgeable in their fields of work. The company mainly has its set-up in the city of Hyderabad but its funding and sourcing services extend to almost every part of the country. The company even extends investments in multiple foreign countries like UAE< UK, Singapore, USA, and many more. The funding of the company till now extends to about 25 companies amounting to almost 40 crores. The star-ups funded by them comprise of:

  • Explara
  • HealthSutra
  • BetaOut
  • Edutor
  • RealBox
  • Thrillophilia.com
  • NowFloats

Let’s Venture:

This platform that got started in the year 2013 is the ideal one that helps in connecting multiple investors and start-ups under one single head. The company has its presence both in Singapore and in India. It has the membership of over 2500 venture capitalists and angel investors who work together to support the new companies in the market. The process of funding here begins in three simple steps:

Let’s Venture
  • Firstly, you need to sign up to the network
  • Fill in the details of your profile
  • Finally, you need to apply to get connected to the investors

In case, the profile that you have, interests the internal team that works at Let’s Venture, then you can get highlighted at a special position at the website. This helps your pitch getting even more visible and you can get connected with many more investors. The investors at this platform work as individuals and not as an entire network. Thus, you can engage in personal discussions with the angels here and build up strong relationships with them.

Ah! Ventures:

This is another dominating online investment network that helps to bridge money and ideas. The platform acts as a catalyst bringing together the investors and promising businesses so that there is wealth creation for both. It has a unique blending of skills, customised services, domain experience and industry which benefit both entrepreneurs and investors. The company has several services to offer to the investors starting from locating investment opportunities for them to facilitating prudent decision making.

Ah! Ventures

For the entrepreneurs, the company offers several gearing services for their explosive growth starting from funding, office spaces to recruitments. When companies approach them for help, the experts here evaluate the present position of the company along with what future holds for them. Thus, the strategies of success framed by the company for businesses are future proof and benchmarks of quality. The multiple services offer at Ah! Ventures comprise of:

  • Venture consultancy
  • Development of human capital
  • Venture operations and management
  • Incubation

The company got started in the year 2012 and since then it successfully creates several milestones in the network of investment. Today, the platform has over 15000 entrepreneurs, and more than 500 investors registered at the network. The company guides every player on the system effectively so that they turn out to be successful in their fields of work. With the multiple numbers of start-up companies that are blooming each day in the market, the company started its own mobile app. Anyone having Android or iOS devices can download the app and subscribe or view the multiple packages available here. Moreover, the official webpage of the company is so much feasible and accessible that almost anyone can avail the services with ease.

1crowd:

By registering on this network, both entrepreneurs and investors can open up new avenues of opportunities for themselves. The platform helps start-ups via funding, co-investments and by connecting them to a huge network of funding partners. The capital solutions available at the platform are huge and promising. They support businesses that come up with incredible venturing ideas. The array of services offered at 1crowd includes:

  • Sourcing and deal origination
  • Mentoring
  • Structured capital raising
  • Guidance on financial models and business plans
  • Screening of proposals
  • Deal closure
  • Monitoring post investment

The team here consists of eminent and knowledgeable personalities experienced in the fields of investment banking, bond and loan issuances, infrastructure and energy, financial services, credit appraisals, portfolio management and much more.

1crowd

So, in case you are in need of quick funding and have the best business plans, then these angel investors can be your best partners. You do not need paying high interests to them for the funding instead they acquire small stakes in the business that you commence. They offer a lot of flexibility to the entrepreneurs. So, without much a delay, get your effective pitch ready and contact the promising angel networks to get the gear of your venture started.

Startup Business Success

Making a Startup Successful – The Mindset & Tools Required

Start-ups play a key role in building the economy of the country. It fosters innovation, creates new jobs and builds competition, all of which works to boost the economy of a country. However, creating a successful start-up is no easy task. Research shows that 90% of start-ups in India fail within the first five years. This is largely due to a lack of innovation and starting off with the wrong mindset.

If you are starting out on a new venture, it is important to go into it with the right planning and mindset. Most entrepreneurs have a passion to change the world. However, it takes more than passion to get a business off the ground. There are a lot of sleepless nights, obstacles and mental, physical and financial strain that goes into creating a successful start-up. Build the right mindset and make use of all the tools available, while getting your company off the ground.

Build The Product For The Customer

Build The Product For The Customer

It is important to have conviction in the product that you are selling, but it is also important to ensure that the customers will like the product too. 42% of new ventures fail because they built a product that consumers didn’t want. As an entrepreneur, you should be open to feedback. One of the biggest mistakes that you can make during the early days of the company is to be too rigid about the vision of what the company does.

In order to ensure that the business develops and grows, you have to adapt to the different needs of the clients. Before investing more into the product, you must work with different clients or pitch the product to customers and adapt based on the feedback. By taking a flexible approach, you will be able to better connect with the target audience and build a product with an interested customer base.

Some of the primary tools that you can use to connect with the customer base are:

  • Online Traffic: Make use of tools such as Google Search Console to understand how customers are connecting with similar platforms. Use this information to plan the best strategies to draw more traffic to your platform.
  • Paid PR: Tools such as Google Analytics and SEO software such as MOZ and Long Tail Pro help you build high-converting online traffic.
  • Collect Feedback: Make use of tools such as Surveypal to collect online feedback and build better relations with the customers

Set The Right Workplace Culture

Set The Right Workplace Culture

All successful endeavours have two things in common – effort and consistency. It is essential to consistently work on a project in order to ensure its success, and this extends to the workspace. Many small or new companies forget to set the right workplace culture; this can often lead to clashes between the employees and the management.

Whether you want to flat organization structure, build a fixed hierarchy or keep flexible work hours, it is important to set the guidelines right at the beginning. Having the right workplace culture helps both employees and management teams stay motivated.

Reports suggest that 80% of small-sized businesses have no HR departments. This makes it difficult to maintain a consistent work culture and address the issues faced by various teams. Companies can put in place small HR teams and make use of online tools to handle these tasks. Reports show that making use of HR tools can help boost workplace efficiency and boost productivity. Some of the best HR tools that can be used are:

  • PeopleStrong
  • Qandle
  • Keka HR
  • greytHR
  • Farsight HCM Engine

Build A Strong Brand

Build A Strong Brand

Most entrepreneurs pay too much attention to creating the perfect product before selling the brand. However, it is important to build the brand along with the product in order to improve customer retention. Reports show that companies that presell their productssee up to 6 to 13% improvement in revenue. By preselling, companies get the opportunity to build products in accordance with the demand.

In order to successfully manage tasks like preselling, it is necessary to have a brand in place. The key elements that go into creating a brand are:

  • Name: The most obvious element of a company or brand is its name. Make use of online tools such as NameMesh, Oberlo or Namelix to get a unique and catchy name for your enterprise.
  • Website: Either hire an agency or make use of tools such as Wix, WordPress, GoDaddy or Shopify to create an online domain where customers can find and interact with the company.
  • Logo: A company requires a unique symbol that users can recognize and associate with the brand. You can make use of online tools such as Designhill, Logojoy or Canva to create a logo.

Define Clear-Cut Goals

Define Clear-Cut Goals

One of the key elements of setting the right mindset is defining what winning means for you and your company.Connect with industry experts and conduct your own research before you define what it means for a company to be successful. This includes clarifying what targets you see your company cross in terms of the number of securing funding, gaining clients, and increasing revenue.

Although a start-up must always stay flexible and adapt to changing scenarios, having a target can help define a path for the company. Clarifying your goals makes it easier to set clear tasks on a daily, monthly, quarterly and yearly basis. There are a host of tools that can be used to handle different aspects of goal setting:

  • Project Management: There are a host of tools that can be used to keep track of the progress and communication with respect to specific projects. Make use of tools such as BaseCamp, Asana or Scoro to keep track of company goals and project progress.
  • Office Communication: Maintain an online repository of the important communication elements and shared information with tools like Slack, Biba, Verishow and more. This helps keep track of set targets and past communications.

Embrace The Ups And Downs

Embrace The Ups And Downs

A new venture will always face a host of ups and downs, but the key factor is to have belief in your project and consistently work through difficult periods. By adapting to changing needs and building a strong relationship with both employees and customers, a company can pave the way for success.

5 HR Challenges Faced by a Startup SME & How To Manage The Same

5 HR Challenges Faced by a Startup /SME & How To Manage The Same

There are 42 million SME in India which comprise of 95% of country’s industrial units contributing to 30% of country’s GDP (6.11% of manufacturing and 24.63% of Service GDP). Together these employ 106 million people, 40% of country’s workforce. Looking at the growth and job creation potential, SME should have good focus on their human resource, but there are many challenges relating to human resources that mar the growth of this industry. It makes it rather non- negotiable to work on the internal structure, HR processes and practices to ensure growth and attract talent. Enlisting some challenges that SMEs face relating to people that HR leaders, company owners and government should address.

HR Challenges Faced by a Startup

Image source : HRSME

1. Absence of HR department in SMEs

According to a CII survey, 20% of medium and 80% of small-sized businesses have no HR departments. It is not possible to implement people related processes and policies without an HR function.  There are two most important reasons for the lack of HR department in SMEs. First, SME’s are more growth oriented. When the companies are startup stage of small, all their objective is how to grow first to be sustainable and reach bigger scale of business. So, human resource is no priority.

Secondly, SMEs operate under budget constraint and perceive having a proper HR department as an expensive burden on their company budget. As, many SMEs have smaller teams, promoters end up managing the HR functions themselves to save cost, rather creating more HR issues. So, the promoter’s culture, value system etc become SMEs culture and when the organisations grow with culture – related issues and no one there to handle these. This leads to lot of politics as when people don’t know where to bring their grievances, they start talking to each other. The recruitments, the appraisals and promotions, exits etc are very subjective.

Solution – SMEs that think HR is just another administrative function, need to correct their perspective. Organisations must include an HR system right in the planning stage and build various people related practices like talent management, engagement, policies related to compensation and benefits. A proper HR function with manual sets standards that helps SMES to take objective decisions related to people’s recruitment, job responsibilities, remuneration, promotion, attrition, company’s stand in case of difficult situations.

2. Challenge in hiring the right talent

SMEs biggest struggle is hiring people with specialised skills. Limited talent pool, inability to offer competitive salaries and fierce competition add to the misery of HR managers.

Secondly, SMEs want to have best of the talent and expect them to multitask at compromised salaries much lesser than those provided by larger organisations.So, many employees resort to working in smaller & riskier organisation but aspire to working in bigger and safer organisations. These will shift to the larger organisations whenever there are vacancies.

Thirdly, SMEs show lack of awareness about the legal hiring standards procedures and practices. Some consciously and unconsciously violate the common employment laws and regulations. These could be as small, but significant as the company not offering a valid employment letter with proper job description, salary and other details to their employees.

SMEs

Image source : Economic Times

Solution: SMEs Organisations should consider human talent more as long-term investment and not immediate ROI. It takes time for a plant to grow into a fruitful tree. There is no other alternative than to have a pool of skilled employees. It is better to employ one employee with good skill sets at industry competitive salary than to have 2 -3 employees with lower skill sets. 

It is critical that all entrepreneurs even as small as a 3 member team should know and understand the employment law and try not to violate them. In case of low budget, SME should consider hiring the HR specialist/consultant to avoid facing the consequences. Having an employee handbook is the most desired element in company HR.

3. Challenge in Building and maintaining the Culture

An organisational culture is basically a uniformly understood set of principles along with non- negotiable organizational values that impact every individual in the company. But, many SMEs struggle in this area due to lack of proper organisational vision and plan and end up following the promoter- based culture.

E.g. StartUps, in the initial and initial growth stage, display full of energy and fast moving entrepreneurial culture in the organisation. The environment is often friendly with young and energetic teams working and interacting closely. There are exchange of ideas and feedbacks. It starts to die down as the company matures. This is when people start getting bored and lose interest. The structure firms up from informal interactions to formal monthly meetings.

Challenge in Building and maintaining the Culture

Image Source

Solution – SMEs need to articulate long-term organizational HR objective for achieving the desired culture and should have a structured plan to get there. HR in turn, can play significant role to keep the culture by laying the standards and keeping everyone informed, engaged and involved. HR can run several initiatives to connect everyone through various platforms – Outdoor sports & picnics, Intra office blogging, social media campaign, coffee mornings where people can share their stories of gratitude towards the organisation and fellow employees. In fact many SMEs are working towards growing bonding among employees and making the employees feel like the part of a family.

4. Aligning Values – A Big HR Challenge

Another big challenge facing HR managers in SMEs is to see the founders’values are aligned with that of larger employee group. Many a time, employees bring in conflicting set of values not in alignment with those of founders. It requires a lot of unlearning on the part of employees and adjustment on the part of the founders. This misalignment often leads to lot of decision-making conflicts, employee dissatisfaction, lower morale and higher attrition rate.

In such challenging situation, HR needs to play a critical role by bringing the attention of founders and employees towards organisational vision and goals.Firstly, HR needs to make the new entrants aware about the SME objectives and set the right expectations right from the point of hiring and induction. Secondly, HR needs to  bridge the gap by inculcating a culture of transparent communication between the founders and employees.

5. Challenge in building capability- based organisations

The real challenge that lies in front of the SMEs is in building a capability-based organisation than individual based organizations, and not forgetting that individuals are the building blocks of the successful organisations. SMEs should implement effective training and development programs for employee upskilling and growth to build organisational capability. But, is it that simple? Due to the budget constraint, it is seldom feasible for SEMs to involve external vendors for upskilling of their employees. So, SMEs lag in case of specific skill-based training.

Challenge in building capability- based organisations

Thought the customised training and development programs are ideal for building organisational capability, SMEs can focus on developing good in house and on the job training programs.Mentorship programs can be one low cost option for training employees. Here, a senior employee mentors a junior on one on one. At least, this keeps both the levels in tune with each other. Juniors feel empowered by learning new skills and getting to know someone senior in the organisation.

6. HR Challenge in Retaining the Talent:

Small companies face great challenge in retaining employees, especially, at the lower level. Salaries are not too good, and teams end up multitasking and over working. Attrition rate in junior level is highest as they might change jobs for small increments without even giving prior notice. Middle and senior employees may find unclear role definitions and unknown career path frustrating and they change over for more clarity and more lucrative offers too.

HR Challenge in Retaining the Talent

SMEs should couple their equitable pay grade for employees with other intangible factors for retaining their employees. Consistent compensation package, job security, employee growth progression plan, employee care and bonding, workplace comfort, inclusive growth are some of the important factors why employees stick to the same organisation for long.In addition to this, how the company behaves with the exiting employees cast impression on those still inside. SMEs need to have more professional approach towards those choose to leave and treat them with equal respect. This will build a culture of mutual respect within the organisation too.

Way forward

More founders need to recognise these challenges that HR and their SMEs can work in tandem to solve and create HR healthy enterprises. When the founders will start viewing HR as a strategic role in the organisations they want to build and not just an administrative function, they will be raising the bars of their organisations. At the same time, employees perceive the enterprises with HR function more positively.

HR managers can also make use of technology and research various factors and trends to analyse satisfaction, performance, appraisals, attrition for getting best talent, the employee retention and SME growth.

Different Types of Funding Sources for your StartUp

Different Types of Funding Sources for your StartUp

So, you have been finally bitten by the entrepreneurship bug and are just about to press StartUp button. Your next question is how you will raise the funds. There are many options to finance your business. We are listing all these sources for you along with their pros and cons so that you can decide which is the best option for you. You may also combine two or more to strike balance.

Types of Funding Sources

1. Self-Funding – Your own savings

This is the first option most of the entrepreneurs try.  So, if you are planning to use your own saving,

Pros:You can straightaway start your business without being answerable to anyone.

Cons:There is a risk that you will lose your hard-earned money if your business doesn’t do well. And, you will suffer guilt for burning your money.

Clever entrepreneurs never use their personal savings for their businesses.

2. family and friends

Next good option you can use is ask your friends or family members to fund your StartUp. You may approach your well to do relatives, uncle, aunt, grandparents. 

Pros: Your friends and family members want to see you successful and will not exert pressure for returning the money soon. This is a faster mode of finance too.

Cons: Family members’ decision to support you is rather emotional and not business like. You may not need to show any projections to them. But, if you fail, you may be subject to humiliation.

You need to make up your mind whetherthe money you are borrowing is a loan with interest or you are offering them equity. Give a timeline when you will be able to return the money and make them aware about any risks involved.

3. Crowdfunding

When a large number of people contribute small amount towards your business providing you with the capital to start your business or a project, it is called crowd funding.

crowd funding

It is mainly a form of social funding where you as an entrepreneur can post your funding requirement for a project, product development,event or a cause etc on digital crowdfunding platforms like Ketto, Wishberry, Fuel A Dream etc.  This will be available to the members nationally and internationally. You can share with your network of friends and family too.

Many people who connect with your dream will pledge their funds without any expectations of returns. Many of these platforms charge small commission fee.

Pros:Get a pool of investors in one place to fund or expand your business.

Cons:Crowdfunding can’t be your long-term funding solution.

In India, there is a trend of people more inclined to give to the social cause unlike other countries where crowdfunding for the business is a usual method.

4. Angel Investor

Angel investors are high net worth individuals who offer you funds in exchange of equity.

It is easier to get angel investors if –

  • Track record to show – If you have already started up and showing a growth sign tells your investors that you are serious.
  • A sharp Business Plan with clear timeline – to show to the investors that you mean business
  • Your Team Experience – Angel investors look for more experienced team. So, it will pay off if you can get a good team of 3-4 on board
  • Get advisors/mentors on board – This will help bring the investors’ fears down.

Pros:A Good funding method with flexible terms. Angel investors come with their wisdom and experience and will guide you as they have invested in you.

Cons:You will be answerable to your investors, so be ready to control your decision making. But, you can negotiate and be explicit about your decision making freedom with them.

5. Venture Capitalists

You can approach a venture capitalist in case your funding requirement is huge and you are looking for scaling up. In turn, you will need to give equity in your business and returns if you go public or another company acquires you. Venture capitalists will be interested in your business only if it has the potential to give good ROI

Pros:Venture Capitals are sharp business people who can mentor you in growing your business. Getting a venture capitalist on board will give your business credibility and limelight too. It opens doors to future funds.

Cons: As the funding amount may be significant, the size of equity will also be sizeable.

6. Get an SME Loan

It is a very good form of funding for you if you still fall under the category of MSME as government recognises that this sector needs special support to become viable. The Government of India provides MSME loan schemes to micro, small and medium enterprises under various MSME loan schemes. These loans are disbursed through schemes and incentive platforms such as Mudra LoanCGTMSE, etc.

Pros: Has longer than usual payback period.

Cons:For getting MSME has typical eligibility criteria. A lot of financial consultants, NGOs will tell you they can do the job for them in return they will charge a fee. But, it is better that

7. Bank Loan

You can also explore getting a bank loan for your start up. Before applying for a bank loan, it’s important to ensure that you are well educated about the various options available.

Pros:It is a fast mode of funding once you qualify. You will not lose any control on your business.

Cons:Loan has interest component and a pay back period in which you must pay back. You may need to pledge a collateral for security to the bank.

Bank loan application requires a lot of documentation and understanding of terminology which can be cumbersome. You many require help of a professional CA who will execute the job for you but will charge 1-2% of the loan.

8. Borrow from P2P Digital Platform

Peer to peer is a another good option for If you are not able to secure loan from the bank and time is running out you can try P2Ps. Digital Peer to Peer Lending platforms like Faircent and i2ifunding that connect individual lenders and borrowers allow you to borrow funds at low cost.

Pros: Very Quick process as compared to all above if your credit rating is good.Get funds at low cost interest rates.

Cons:You can’t borrow more that Rs.50,000 from a single lender across all the P2P Platforms.

You need to study all the above given funding options in detail, talk to your fellow entrepreneurs, discuss in forums before finally going for a particular funding option. Don’t depend on someone else completely but educate yourself well. After all, it is you who is responsible for the money.

P2P – A good option for SME funding needs

P2P lending – can it help MSMEs for funds

Since 2017 when RBI recognised online P2P industry as financial service segment and allowed NBFC-P2P status to 11 P2P lending platforms in India, it has given new hope to the MSME sector.

The Credit Problem

Despite the fact the MSME’s contribution to the GDP is 30% and provides employment to 100 million of population, banks consider it risky to lend to SME. Lack of data makes it difficult for banks to assess the credit history and financial health of the concerned SME.

the fact the MSME’s contribution

Image Courtesy: MoneyControl.com

This has led to a credit gap of $600 billion in India’s MSME sector (as per Omidyar Network and Boston Consulting Group’s report) with 60 million MSMEs where 40% of MSMEs are forced to turn to unorganised sources e.g. individual personal bankers/lenders at double the interest rates. Inability to get funds and funds at high cost leads to non viability of many SMEs. 

P2P – A good option for SME funding needs

Online P2P lending platform is an alternative form of financing when an individual can get loan directly from another individual without the involvement of a financial institution eg banks, NBFC, etc. The P2P lending that mainly targets unbanked has great relevance in India and increasingly getting popular with Small and Medium Enterprise who don’t have much credit history to show. 

P2P – A good option for SME funding needs

One SME requirement, Multiple offers:

As an SME, you just need to place your requirement and wait. Based on your credit score, multiple lenders will get to view your requirement and auction for your need by sending you their proposals. It’s up to you to choose which proposal to accept. So, as compared to going from bank to bank, now you have many people competing to give you funds.

P2Ps offer faster credit:

P2Ps digital platforms being paperless and least human intervention are much faster. Your borrower profile goes through the credit rating procedure and background verification. Being the promoter of the SME, your profile is equally important. So, P2Ps use AI-Analytics based model to evaluate important data points about you and your company for the better assessment. As soon as your borrower profile is approved, you can have your P2P loan sanctioned and money transferred in a few hours.

P2Ps don’t require collateral:

Whereas banks require collaterals as security in order to sanction a loan, you don’t need to provide any security or collateral. All that you need is a good credit rating and your ability to repay the loan.

P2Ps are low-cost credit option:

Lenders on P2P platforms offer rates as low as 5% to 30% high depending on the credit rating of the borrowers. Also, you minus the intermediary costs, so you have cheaper credit. P2P loans are transparent without any hidden charges, fine print, no prepayment charges as well.

P2P – SME Challenges

According to the NBFC-P2P regulatory guidelines, a single lender’s combined exposure across all P2Ps cannot be more than Rs. 10 Lakh. Same way, a single borrower can max get Rs. 10 Lakh loan from all the p2p combined. Also, a single lender cannot lend more than Rs. 50.000 to a single borrower with loan maturity not to exceed 36 months.

With this kind of limitation, It is not possible for the P2P sector to derive volumes, hence hinders the sectoral growth. At the same time, it is impractical for an SME to borrow from different lenders. It will remain a challenge to help India’s SME unless Reserve Bank relaxes its P2P guideline.

SMEs due to lack of knowledge are also either not much aware of the P2P lending or don’t consider it as a credible source of funding. Many P2P operators that see MSME as an opportunity are trying to pull in more SMEs by engaging them via many awareness drives.

Way forward

P2P portals are seeing a huge opportunity in the SME sector and have the potential to support their funds requirements. Despite all odds, Faircent.com gave 64% of its total disbursement to SMEs in 2018. RupeeCircle, IndiaMoneyMart, paisadukan, LenDenClub, and CashKumarare some of the prominent players in India’s P2P sector. Whether SME also sees the same hope in P2P and RBI consider relaxing the regulation at least specifically for the SME borrowers will further help minimise the SME credit gap.