Funding Guide • Capital Options
Funding Instruments
for Startups & Businesses
Government grants, business loans, investor funding, and international capital - explained by business type and growth stage, so you know exactly which options are right for your situation.
Sapno Se Safalta Tak
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Funding Categories
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Genesis Fund
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Schemes Covered
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Expert Guidance
The Basics
What Are Funding Instruments?
Funding instruments are financial tools that businesses use to raise capital. They fall into two broad categories: debt-based funding, where you borrow money and repay it over time, typically with interest; and equity-based funding, where you offer ownership shares in exchange for capital.
These sources can come from government schemes, private investors, or international funding routes, depending on the nature and stage of the business. Vikas Bharat maps the options by structure (Pvt Ltd vs LLP) and growth stage so you are not applying to the wrong desk.
Three Source Types
- 01
Government funding
- 02
Private funding
- 03
International funding
- 04
Matched to stage and structure
At A Glance
Types Of Funding Instruments
Grants, Bank Debt, VC, Angels, NBFCs And International Capital - Each With A Different Fit.
01
Government Grants
Non-repayable funding from central and state schemes - SISFS, RKVY, Genesis Fund (₹490Cr for tech startups), MSME subsidies.
02
MSME & Bank Loans
Term loans and working capital from scheduled banks with CGTMSE or MUDRA collateral-free options for eligible businesses.
03
Venture Capital
Equity investment from registered VCFs and AIFs for startups that can grow fast and are targeting large markets.
04
Angel Investment
Early-stage equity from HNIs and angel networks - ideal for pre-revenue or seed-stage businesses needing mentorship alongside capital.
05
NBFC Financing
Flexible debt options from NBFCs for businesses that may not meet traditional bank criteria - faster processing with competitive rates.
06
International Funding
Foreign venture capital and institutional investor routes for startups targeting global markets, subject to FEMA and RBI regulations.
Government Funding
1. Government Funding Instruments
Non-Refundable Grants, Bank Debt, And Government-Backed Equity - With Different Rules For Pvt Ltd Vs LLP.
01
Non-Refundable Grants
Financial assistance from government bodies that does not need to be repaid - typically for innovation, R&D, green energy or export promotion. Both Private Ltd and LLP companies can apply if the project matches the scheme. Grants come with strict compliance and reporting requirements.
02
Debt-Based Funding (Banking)
Loans and credit facilities from public sector banks or financial institutions. Both Pvt Ltd and LLP companies qualify; the bank assesses creditworthiness, collateral and the business plan. Examples: term loans, overdraft, cash credit, Mudra loans.
03
Equity-Based Funding (Investors)
Government-backed Fund of Funds that invest via VC or PE rather than directly. Primarily for Private Ltd companies that can issue equity. LLPs cannot issue equity and are typically excluded from pure equity schemes.
Structure Matters
Funding Source Access For Pvt Ltd Vs LLPs
The Instrument You Can Use Often Depends On Whether You Can Issue Equity.
Equity & Debt
Equity Funding (VC, Angel, PE)
Private Ltd: excellent access (can issue shares). LLP: none or extremely limited - cannot issue equity.
Debt Funding (Bank Loans, NBFCs)
Private Ltd: good access based on credit score and collateral. LLP: good access on the same basis.
Grants
Grants / Government Schemes
Private Ltd: good access based on project and innovation. LLP: good access on the same basis.
Private Funding
2. Private Funding Instruments
Non-Government, Domestic Debt And Equity - From Friends And Family Through To Professional VCs.
01
Private Loan
Typically from friends, family or HNIs who are not professional lenders - often trust-based with flexible terms. Both Pvt Ltd and LLP can use this; Pvt Ltd companies must comply with Company Law on loans from directors/shareholders, while LLPs often receive loans from partners.
02
Institutional Loan
Debt from private sector banks, NBFCs or specialised institutions. Available to both Pvt Ltd and LLP - similar to government debt, often processed faster and potentially at higher interest rates.
03
Venture Capital (VC)
Equity from professional firms investing in high-growth startups in exchange for a stake, expecting a large return on sale or IPO. Exclusively for Private Ltd companies. LLPs cannot raise funding directly from VCs.
04
Angel Investors
Affluent individuals who provide seed capital for convertible debt or equity, often with mentorship. Usually invest in Private Ltd companies. LLPs may receive loans but not equity investments.
Cross-Border Capital
3. International Funding Instruments
Capital From Outside India For Companies With High Scalability - FEMA And RBI Rules Apply.
01
Foreign Venture Capital
Foreign VC funds invest in high-growth Private Ltd companies, bringing global networks as well as capital. Strictly for Private Ltd. Raising from international VCs requires FEMA and FDI compliance.
02
Institutional Investors & ECB
PE funds, pension funds or sovereign wealth funds invest in established Private Ltd companies. External Commercial Borrowings (ECB) are also available to both LLPs and Pvt Ltd companies, subject to regulatory compliance.
How We Match You
How We Match You To The Right Instrument
Share Your Business Stage And Capital Need - We Map The Most Suitable Instruments And Follow Through.
- STEP 01
PROCESS
Profile Assessment
Evaluate your business stage, sector, structure (Pvt Ltd vs LLP) and capital requirement.
- STEP 02
PROCESS
Instrument Mapping
Identify eligible grants, loan schemes and investor categories - with pros and cons for each.
- STEP 03
PROCESS
Documentation
Prepare applications, business plan, financials and any required compliance documents.
- STEP 04
PROCESS
Application & Follow-Through
Submit to the right portals and stakeholders, track status and respond to queries.
- What are funding instruments?
- Funding instruments are financial tools used by businesses to acquire capital, including debt-based (loans) and equity-based (shares) funding options.
- What are the different types of funding instruments?
- The main types are government funding, private funding, and international funding, each with its own set of tools like grants, loans, venture capital, and angel investments.
- What is the difference between debt and equity funding instruments?
- Debt funding involves borrowing money that must be repaid with interest. Equity funding involves selling a portion of the company in exchange for capital.
- How do venture capital and angel investment instruments work?
- Both involve providing equity in exchange for capital, but VCs typically invest larger sums and require clear exit strategies, while angel investors often invest smaller amounts in the early stages and provide mentorship.
- What is a convertible note and how does it work as a funding instrument?
- A convertible note is a form of short-term debt that converts into equity when the company raises a subsequent round of funding.
- How does crowdfunding work as a funding instrument?
- Crowdfunding allows businesses to raise small amounts of money from a large number of people, typically via online platforms.
- What funding instruments are available for startups and small businesses?
- Startups and small businesses can access government grants, bank loans, venture capital, angel investments, and more.
Funding Instrument Questions, Answered
Debt Vs Equity, VC Vs Angels, Convertible Notes, Crowdfunding, And What Startups Can Actually Access.
What are funding instruments?
Funding instruments are financial tools used by businesses to acquire capital, including debt-based (loans) and equity-based (shares) funding options.
What are the different types of funding instruments?
What is the difference between debt and equity funding instruments?
How do venture capital and angel investment instruments work?
What is a convertible note and how does it work as a funding instrument?
Keep exploring
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