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Funding Options for the Registration of Private Limited Company

Registration of Private Limited Company

Want to start a Private Limited Company in India? It is the most popular choice of entrepreneurs who want to establish their companies in today’s dynamic business world. But for the registration of Private Limited Company, you need significant financial resources. Raising funds is the most crucial aspect of a Private Limited Registration. A Pvt Ltd registration needs funds to manage the various operations of the company. Today, in this blog, we will discuss the multiple options available to raise funds for a Private Limited Company registration in India. 

Before moving ahead with the funding options, let’s have a look at what a private limited company is.

A private limited company is a business entity owned by its shareholders privately and has limited liability. A Pvt Ltd company is registered under the Companies Act 2013. It has been governed under the MCA, i.e., the Ministry of Corporate Affairs. The general public can’t trade the shares of a Pvt Ltd Registration on the stock exchange. The company is a separate legal entity.

Funding Options for Registration of Private Limited Company

There are several options available to raise funds for online Private Limited Company Registration. Here, in this section of the blog, we will discuss about the different sources from where you can raise funds to complete your Private Limited Company Registration process hassle-free. The options are as given below-

Self Funding

Self-funding is also known as bootstrapping. It involves raising funds for your company by using your personal savings, credit cards, assets, or revenue generated from the business without any external help. This method is best for entrepreneurs who have sufficient personal savings or for those who want to start a business with low initial capital requirements. 

Advantages 

  • This method of funding will provide you with complete control over your company without any need to answer the investors.
  • If you opt for this funding method, you can make decisions freely without any external pressure.
  • This method of funding encourages financial discipline and resourcefulness.

Disadvantages

  • The growth of your company may be slow and limited because of its limited financial resources.
  • There is a high personal financial risk associated with this funding method.

Angel Investors

Angel investors have a high net worth. They provide you the capital for startups in exchange for ownership equity or convertible debt. They provide funds to early-stage companies that have high growth potential. This method is best for the startups that have high growth potential.

Advantages

  • The angel investors did not just provide the funds but also brought valuable industry expertise and contacts that helped in business expansion.
  • The angel investors are less formal and more flexible as compared to venture capital firms.

Disadvantages

  • If you opt for angel investors, you need to give up a portion of your company’s equity to the investors.
  • Angel investors have the potential to influence business decisions.

Friends and Family

You can also acquire the funds for your Pvt Ltd Company Registration from friends and family members. It is the most common practice among the entrepreneurs. If you raise funds from family and friends, it will work as a loan, equity investment, or a combination of both. It is the best funding option for those who have early-stage startups that need comparatively less capital and also have a strong network of supportive friends and family. 

Advantages

  • It will be an easier and quicker way to access funds for Pvt Ltd Company Registration in India from friends and family as compared to the formal channels.
  • Funds from family and friends usually come with more flexible terms and conditions.

Disadvantages

  • Financial dealings with family and friends can potentially strain personal relationships
  • Usually, you get limited funds from family and friends.

Bank Loans

You can raise the funds for your Private limited registration by borrowing a fixed sum of money from banks. These loans can be secured or unsecured and offer fixed interest rates. You have to repay this amount to the bank over a specified period of time along with the interest. This funding method is best for well-established companies that have a reliable source of income and reliable securities in order to obtain a loan.

Advantages

  • Banks do not acquire ownership holdings, so you have complete control over your company.
  • As repayment schedules of the bank are fixed, it will help you with easy financial planning.

Disadvantages

  • Usually, ask for a guarantee, which might be difficult for the businesses to provide.
  • Sometimes, interest rates can be high, which results in an increase in the financial burden.
  • Eligibility criteria for a bank loan are usually strict, and also this process includes excessive paperwork. 

Venture Capital (VC) Firms

Venture Capital (VC) Firms usually provide funds to startups and small businesses with long-term growth potential. They provide funds in exchange for equity and also actively take part in strategic decision-making. VC funding is best for technology-driven industries that are ready to scale quickly and want funds.

Advantages

  • With VC funding, you will get access to a large amount of capital.
  • Venture capital firms provide you with professional management support and networking opportunities.
  • It will accelerate the growth and scalability.

Disadvantages

  • If you raise funds from VC firms, then you will not have the complete control over the decisions of your company.
  • It will increase the pressure to achieve high returns and potentially cause a loss of control.

Crowdfunding

With Crowdfunding, businesses can raise funds from a large number of individuals, usually through online platforms. This funding method is best for innovative or consumer-oriented products and services that can generate enthusiasm and appeal to the masses.

Advantages

  • This funding method works as a marketing tool and also helps in creating awareness and a consumer base.
  • This method will compute market interest and also validate the ideas of the businesses.

Disadvantages

  • There is no guarantee that you will be able to complete your funding target with this funding method.
  • It requires a great effort in marketing and maintaining the campaign to raise funds for your Pvt Ltd Company registration online via crowdfunding.

Government Grants and Schemes

The government usually provides schemes and grants in order to promote entrepreneurship and economic growth. This method of funding simplifies the financial burdens and also provides a stable foundation for the growth of your business. It is best for startups in sectors that have been prioritized by the government or those that contribute to social and economic development.

Advantages

  • There is no need to give up the equity, and you have complete control over your company.
  • With government schemes and grants, you will get the additional support in terms of mentorship, networking, and resources.

Disadvantages

  • There is a high competition for acquiring government grants and schemes.
  • The application process of the government schemes and grants is very lengthy and time consuming.
  • These schemes usually come with strict usage conditions and reporting requirements.

Revenue Based Financing

Revenue-based financing involves raising capital from investors who receive a fixed percentage of the company’s ongoing cross revenues unless they have been paid a predetermined amount. This method is best for businesses that have a strong revenue model and want non-dilutive financing options.

Advantages

  • If you raise funds through this method, you will get full ownership and control over your company.
  • Repayments are on the basis of revenue, making the finances more manageable.

Disadvantages

  • This method of fundraising can be expensive in the long term as compared to the traditional loans
  • This method is usually suited for businesses that have predictable and steady revenue streams.

These are the major funding options available for you, if you want to do the Pvt Ltd company Registration online. You can raise funds from any of the following methods as per your business goals and objectives. You can also seek the expert guidance of professionals. 

Final Words

It is a crucial step in the journey of establishing and growing a Private limited company registration in India to secure funds for the smooth company operations. There are numerous options available in India for raising funds. Each funding options have its own set of advantages and disadvantages. Choosing suitable funding options depends on the stage of the business, the industry sector, and specific financial needs. So, you should evaluate these factors carefully in order to choose the best funding strategy as per your business goals and visions. You can also seek the professional guidance of experts like Legal Pillers.

Legal Pillers will help you to choose the right funding option for your business. We will provide you with the service of Private Limited Company Registration in India. So, if you have any questions related to funding options available to your company, you can contact us freely. Embrace the Legal Pillers and select the best funding options suitable for your business. 

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