Over the past couple of decades, India has emerged as a significant player in the global business market aided by favourable policies and legislation that ensure the creation of a more liberalised commercial landscape. While foreign direct investment has worked alongside large magnates to contribute to this growth saga, the necessity of dovetailing growth with competitive opportunities for the youth has been realised in recent times. The reduction of tariffs, coupled with the development of strong infrastructure and transparent policies, has generated immense confidence in today’s youth. Thus the flagship programme launched under the “Make in India” banner is the ultimate green signal for the government’s commitments to entrepreneurship and growth.

Ready, Steady And Go

Starting a small business requires one to follow a series of steps and guidelines issued by the Ministry of Corporate Affairs. These have varied costs which are nonetheless moderate and might take varied durations of time to be completed. The initial procedures involved comprise the registration for a DIN and a digital certificate followed by the registration of a unique name with the Ministry of Corporate Affairs. These could be done online. These steps are followed by its incorporation, obtaining a TAN and PAN number, and it’s registration for VAT. Besides, it also needs to be registered under the state and municipal offices under the office of inspectors, shops, establishment Act, etc. The registrations for Profession Tax, EPFO and Medical insurance follow. The company is now ready to set sail in the high seas of growth.

Why Start a Small Business

A small business is a very lucrative option for the youth in India today. There are a plethora of reasons that could be cited in support of this. They are as follows:

  • First of all, with the economy witnessing steady growth, and the rate of growth is somewhat high and stable, investor confidence is sure to accelerate. This gives tremendous scope for the starting of a small business for a profitable future.
  • The government policies in the last few years have laid special emphasis on the MSME sector, providing easy small business loans and credit along with tax reliefs and concessions. Coupled with fair and transparent business policies, these assure that the launch of a small business is now more secure.
  • With the development of opportunities in the urban sector, the migration of individuals from the rural sector ultimately facilitates businesses since the demand for products is likely to rise along with the easier availability of workers
  • The demographic dividend of the country allows businesses to lay aside the apprehension of not having a reliable workforce. Thus the long years of service guaranteed from individuals help establish the atmosphere and ecosystem for small business.
  • The relaxation of procedures for starting businesses and the accompanying trust reposed on the private sector has caused even foreign firms to seek fecund pastures in India. The simplification of tax regimes with the roll-out of the GST, the end of the Inspector and License Raj has made India extremely start-up friendly.
  • The growth of multiple enterprises relying on each other along with a rapidly burgeoning middle class has created a favourable market in the country bolstered by investments in technology, transport and communication. Added to this is the fact that basic operational costs are very low in India. These include costs of land, labour, food, medical amenities, and internet.
  • Last but not the least, the easy availability of credit for this sector has been the mainstay of budget stories for quite some time now. The obtaining of business loans in India is, therefore, simple. This is quite understandable because the small and medium enterprises sector contributes no less than 48% of the GDP.

Concerns about finance

While the opportunities abound in every corner, there are certain concerns that lurk in the domain of finance. The various procedures for getting easy small business loans along with their pros and cons will be detailed out.

  • Self-funding is a great way to ensure one’s financial assistance if one has been able to meet one’s capital requirements. This allows one an independent entry and exit plan with no obligation to part with a share of profits. Besides the hassles of obtaining permits are allayed.
    However, the specialisation of operations calls for dependence on others while the scope for a full arrangement of capital is limited. Besides the individual’s sole loss bearing risks also dissuades people from resorting to this option.
  • The bonds of friendship and credibility may cause individuals to pool in funding from friends and family members. Since there is no loan charged and no collateral, this is a zero liability option which also has the added advantage of flexible repayment. However, the absence of proper documentation might hamper credibility in the long run and downturns might affect the goodwill and hamper relationships.
  • Angel investors include individuals or agencies who are willing to venture out to fund an upcoming enterprise. Sometimes, crowdfunding could be done with the involvement of a group of individuals online. In these cases, the obvious advantage lies in the low risk of repayment in the case of failure and reliance on mutual understanding to facilitate certain procedures. Besides business loans in India through this route has gained prominence in recent times aided by government incentives. However, the profits will need to be shared, and independent decision making is not possible since the investor(s) have a predominant voice in determining the fate of the enterprise.
  • Venture Capitalists refer to individuals and entities who are Angel investors who provide large-scale funding to promising projects. The issue of large capital requirement is solved thereby, and the entrepreneur also gets to enhance his or her business skills, expertise and talent under the VC’s guidance. However, the firm or the individual derives a bulk of the equity share in the organisation through such an investment and therefore gets to call the shots at almost every step.
  • It is not wise to gainsay the importance of Banks and NBFCs as traditional lenders of the last resort. This is so because government incentivisation of small businesses can only happen through its provision of easy small business loans. Small business loans in India are advanced through banks and NBFCs. Besides, banks also can underwrite stocks and most importantly, are not interested in equity holding or profit-sharing. Their interest solely lies in loan repayment. However, the major disadvantage lies in the complexity and length of the procedure involved. Besides the quality and merit of the proposal determines the rate of interest and failure to repay can adversely affect ones credit score and future prospects. Stricter rules for non-compliance have also been launched by the RBI through codes such as Insolvency and Bankruptcy Codes.

Another option available is to obtain funding from online sources. Although the procedure is quicker and swifter allows one to compare various options online, there are trust issues, and the credibility of the online lender is a serious concern.

Thus, although the future looks promising, it requires determination, grit and prudence to succeed. However, one only needs to take advantage of the wind and set sail on the high currents of opportunities.