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Funding Challenges? Women-Owned Companies Can Use Special Schemes to Secure Funds

Funding Challenges? Women-Owned Companies Can Use Special Schemes to Secure Funds

In India, female founders make up less than 15% of the total entrepreneurs. This low figure can be chalked down to a few reasons, mostly stemming from a lack of access to funds. 

The government undertakes regular initiatives to encourage more women in the business space and to supply necessary funding for women-owned ventures. Multiple NABARD schemes, MUDRA loans and other financial support schemes have been set up as part of this. 

This is also why financial institutions like banks and NBFCs have loan offerings specially curated for women entrepreneurs. Such initiatives are key to bridging the funding gap in women-owned businesses. Keep reading to know more.

Challenges Faced by Female Entrepreneurs During Fund-Raising 

Securing funding for a business is a struggle, particularly because lenders have strict criteria. Government initiatives like the NABARD schemes and women-led self-help groups aim to give you access to required funds, even in the rural areas of India.

These are the common challenges women face while embarking on fund-raising for their business, through loans or investors:

  • Gender Bias

Despite huge strides made by women in business, gender bias comes into play every time you apply for a loan or for investor funding. In fact, global studies show that 62% of female entrepreneurs felt some form of gender bias during fund-raising. Many lenders also don’t approve loans unless co-signed by a man.

  • Access to Funds

In most households in India, women don’t have access to a corpus of funds. Most financial holdings are owned by men, and passed on to men, leaving women with no assets to leverage and no cash to funnel into the business. 

  • Lack of Societal and Family Support

Women are usually tied to household chores and family responsibilities, and are many times discouraged to take up work if it affects their personal roles. Without any motivation or support, running a business becomes difficult.

Credit Products and Government Schemes for Women Entrepreneurs in India

Female entrepreneurs can benefit from loans offered by private lenders such as banks and NBFCs. Many of these are tailor-made for female entrepreneurs. Moreover, the government has also put in place various schemes for women entrepreneurs. Here are a few:

Private Sector Loans for Women Entrepreneurs

A number of lenders have specialised offerings aimed to encourage borrowing among female entrepreneurs. Here are examples of a few such loans:

  • KBL Mahila Udyog

This is a loan offered by Karnataka Bank to women-owned businesses. It allows loans of up to ₹10 Lakhs, which can be used to address expenses from any income-generating activity. 

  • Mahila Udyam Nidhi Scheme

Offered by Punjab National Bank and Small Industries Development Bank of India (SIDBI), you can get loans of up to ₹10 Lakhs to start new small-scale businesses.

  • Union Nari Shakti Scheme

Offered by the Union Bank of India, this scheme allows a loan of up to ₹10 Crores, for all women-owned and managed MSMEs. This can be used for the purchase of business premises, machinery and to meet working capital requirements. 

  • Orient Mahila Vikas Yojana Scheme 

Offered by the Oriental Bank of Commerce, this scheme offers loans of up to ₹25 Lakhs, to meet varied business expenses.

Government Schemes for Women Entrepreneurs

Of the many government initiatives aimed toward empowering women entrepreneurs, the noteworthy options are: 

  • NABARD schemes
  • MUDRA loan scheme
  • Annapurna Scheme 
  • Stree-Shakti Scheme 

Each of these cater to nuanced business needs, while the NABARD schemes specifically cater to women entrepreneurs based in rural India. Here’s a closer look at these:

  • Annapurna Scheme

This scheme is directed towards women entrepreneurs based in the food catering business.

It allows you to borrow up to ₹50,000, repayable over a period of three years. You can use these funds to meet business needs such as buying utensils, raw materials, mixer grinders, baking supplies and more.

  • Sree-Shakti Scheme

Under this scheme, female business owners can get a loan with an interest concession of 0.05% on an amount of more than ₹2 Lakh. Self-employed female professionals such as doctors and CAs can apply. You can also apply if your business is engaged in agriculture and retail trade activities.

  • MUDRA Loan Scheme

You can get funding of up to ₹10 Lakhs under this scheme, based on a scalable business plan. It is usually used by entrepreneurs in service industries to open beauty parlours, bakeries, tailoring shops and more. 

  • NABARD Schemes

Set up by the National Bank for Agriculture and Rural Development, NABARD schemes aim to foster rural prosperity and improve the financial inclusion of women. NABARD has made credit easily accessible for rural women setting up small businesses by setting up support schemes like:

  • Self-Help Groups (SHGs)
  • Joint Liability Groups (JLGs)
  • Micro Enterprise Development Programmes
  • Livelihood Enterprise Development Programmes 

Alternate Methods to Secure Business Funding

If you do not qualify for any of the above-mentioned loans and schemes, you can still choose traditional financing instruments to secure business funding. While these usually do not offer special terms for female entrepreneurs, they are still useful to raise the required funds. 

This includes personal loans, loans against securities, commercial business loans and more.

Accounting for nearly half of the population, investors and lenders cannot afford to hold on to bias against women founders and business owners. Instead, there needs to be a heightened focus on initiatives at a grassroots level, such as the NABARD schemes.

Along with encouraging more women to take up entrepreneurship, better access to funds and financing should be made available. As of now, you should try to make full use of the concessional rates and special offerings available. Before applying, it is imperative to conduct your own research to pick the credit option best suited for your business needs.

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