Funding

Why Do Female-owned Businesses Face Obstacles in Funding

"Getting a bank loan for a new business idea is a big challenge in India for a woman entrepreneur"
Why Do Female-owned Businesses Face Obstacles in Funding
Image credit: Pixabay
Entrepreneur Staff
Correspondent, Entrepreneur.com
3 min read

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According to the data revealed by the Sixth Economic Census by the National Sample Survey Organization (NSSO), only 14 per cent of businesses are run by women in India. This is obviously a pretty staggering number, but the pertinent question is what is stopping Indian women to join entrepreneurship.

Talking to a few women entrepreneurs, we got to know that one of the major challenges is funding on their path. Most of the women entrepreneurs confessed that they faced a lot of obstacles in raising funds. To discuss this issue, which is being a major deterrent in a bid to raise the number of women entrepreneurs, Entrepreneur had a chat with a few entrepreneurs.

Lack of Mentorship for Women Entrepreneurs

As much as women are realizing that entrepreneurship is a lucrative career path, there are many women who are backing out as they feel it’s not easy to sustain in the market. While talking to the founder and Director of Avaali Solutions Pvt. Ltd, Srividya Kannan said there is lack of mentors who could back you and guide you on the right path.

Speaking about how it’s not easy to find mentors, she said, “Typically, fully backed collaterals are easier to get, however, obviously therefore it means that the promoter needs to have corresponding assets or semi-liquid collaterals. Equity is expensive, and needs careful thinking. Having a good advice is therefore very crucial to raise the right kind of money needed to fund a business, and such good advice itself is expensive.”

She added that with the changing scenario of women entrepreneurs, there are multiple examples that are inspiring more women to be entrepreneurs, but lack of support is a big hustle.

Kannan’s Tip:  It is important for you to curate your investors as much as the other way around. Choose your funding partners carefully as it has a long-term impact on how the company grows.

Debt Funding from Banks is a Huge Deterrent

Gurugram-based Manali Guha, Co-founder of Café Stay Woke shared that getting a bank loan for a new business idea is a big challenge in India.  

Reminiscing her experiences of funding, she said, “Private banks do not fund a business without a two- year balance sheet. PSUs under startup or stand-up India do have dedicated funds to be allotted but service sector getting funded is a long shot.

Guha also categorically mentioned that for a new company investors’ hold on equity is a big challenge. She advised that one should find partners who understand your vision, otherwise you’ll be diluting stakes and somewhere the path you had taken will get changed. 

Tip:  Make use of the stand-up India scheme. You need to have a solid idea and plan and own 51% or more stake. Minimise your personal liabilities and show some stable income.

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