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Running a business in India has become a lot more challenging than ever before. According to a blog published by TMF group, the capital required to start or sustain a business in India is astronomical. One of the primary reasons here is fierce competition, high loan interest rates, and limited disposable capital cap of venture capitalists or angel investors. Does that mean that one should quit before even trying? Absolutely not!

Besides the traditional lending systems, there sits another means to get business capital and survive the market heat. Introducing growth financing – a new-age fundraising system that allows businesses to raise money from lenders in exchange for a percentage (or fixed amount) of their monthly revenue.

In this blog, we’ll decode what is growth financing, how businesses can leverage it to their benefit, and how GoKwik fits into the picture.

But let’s begin with the basics first – what is capital and why do businesses need it.

What Is Capital?

Capital in business refers to the sum of financial assets that are required to produce goods or services. These funds can be used to initiate operations, meet daily expenses or grow and expand the business.

Ideally, there are three types of capitals.

Seed capital – also known as seed funding, it is the initial investment required to set up a business
Working capital – it refers to the fund required to meet the day-to-day expenses of the business such as rent, utility bills, employee salaries, administration and so on
Growth Capital – this refers to funds that a business needs to expand its operation

Growth capital is exactly what the name implies — a growth driver. It serves as a growth catalyst for businesses boosting their present growth rate and cash flow. Alternatively, growth capital is also known as growth financing.

Equity Investment Vs Debt Financing Vs Growth Financing

India has become one of the top emerging economies in the world in terms of entrepreneurship and business. We are recognised as the 3rd largest startup ecosystem in the world with 2-3 startups founded every day. Today, 75,000 plus startups operate in the country, a number which is expected to grow by around 12-15% every year.

Sustenance of such a high number of startups demands infusion of funds on a regular basis. While many startups are able to build a bootstrapped and profitable business, others may need additional external funds to grow their business and steer from drying out.

Such businesses can turn towards equity investment, debt funding, or opt for growth financing. Here’s a table of differences between the three.

Difference Between Equity Investment Vs Debt Financing Vs Growth Financing

Of the three types explained in the table above, growth financing is the newest investment seaking method. It has many advantages and an ideal loan borrowing medium for small and medium-sized businesses.

Equity Investment	Debt Financing	Growth Financing
Investment offered by Angel Investors or Venture Capitalists (VCs)	Money borrowed from a bank or a lender	Funds bagged from an investment firm with no equity pledgeing
Deep involvement of investors or capitalists in the business	No involvement in business processes or operations	No involvement of investment firm in business operations
Involves selling a portion of the company’s equity	Involves asset pledging and money borrowing at a predefined rate of interest	Involves paying a specific amount/percentage of the revenue earned per week/month, as agreed
Fairly large capital investment	Comparatively smaller capital loan	Comparatively smaller growth capital borrowing
No additional financial burden on the company	Some additional financial burden on the company	No additional financial burden. Higher revenue gains
No such repayments. Company profits are shared with the investors	Fixed repayments and not linked to the performance of the business	Repayments are linked to the performance of the business
Loan value depends on business performance	Loan value depends on collateral assets, personal guarantees and business P&L	Loan value depends on company’s sales and profitability
Lengthy and tedious investment disbursement process	Lengthy and tedious loan disbursement process	Instant and simple fund disbursement process

Growth Financing By GoKwik

GoKwik is one of the leading eCommerce enablement companies that focuses on unlocking growth for eCommerce brands. Of the many solutions offered by GoKwik, Growth Financing is the newest addition.

Via Growth Financing, GoKwik extends a hand of capital-led help to its partner merchants and helps them upscale their growth and expand business horizons.

It provides capital funding upon straight and simple prepositions.

Quick and hassle-free capital disbursement
Up to INR 5 crore of capital at an Annualised Percentage Rate (APR) as decided between the two parties.
A loan tenure of up to 12 months
Fixed weekly/monthly repayment spread across the loan tenure
No security or collateral pledging
Zero upfront charges and no hidden costs

Criteria For Qualifying Businesses

The ideal criteria for a business to avail a loan under growth financing typically includes,

Steady Revenue Stream: Any business planning to avail growth financing must demonstrate a consistent and predictable revenue stream. This helps ensure their ability to make regular repayments.
Growth Potential: In a growth financing situation, a lender looks for the borrowing company’s revenue growth potential. It typically indicates the business’ capability to generate higher future cash flows and benefit to the lender.
Profitability: Next on this list is profitability. A borrowing business must showcase a good track record of profitability or the potential to achieve profitability in the near future. If a business fails to do so, the probability of them getting the loan under growth financing becomes grim.
Scalability: Lenders prefer lending capital to businesses that have a strong and scalable model. Meaning, the borrowing company possesses the ability to increase revenue without proportionally increasing costs, indicating higher repayment capacity.
Industry Stability: Another factor taken into consideration is the overall stability of the industry in which a borrowing company is operating. If the industry itself is on a positive growth trajectory and the business too has positive growth potential, the likelihood of them getting growth capital are higher.
Sound Financial Management: A business must demonstrate effective financial management practices, including accurate financial reporting and control systems. This enhances their chances of loan approval.

Besides these, many growth financing lenders may also ask for collateral or personal guarantees in some specific situations.

GoKwik, on the other hand, demands zero guarantees. It ideally judges a business on the basis of above mentioned points and disseminates loan capital instantly if a business fulfils the stated criteria.

Documentation And Financial Information

The following documents and financial information are typically required to avail capital loan under growth financing.

Financial Statements: A business must provide audited or reviewed financial statements. These ideally include, Income statements
Balance sheets
Cash flow statements

Revenue Information: A borrowing business must submit detailed revenue records, which may include,

Historical revenue
Future projections
Revenue growth potential

Tax Returns: This is another important set of documents required to avail growth financing. Recent tax returns help demonstrate tax compliance and financial stability of the borrowing company

Bank Statements: Specific period bank statements help understand the cash flow and account activity of the company
Legal and Business Documents: Similar to other loan procedures, borrowing companies must furnish their legal documents for authenticity purposes. These may include, Incorporation papers
Company licences
Contracts
Any other relevant business agreements

Outstanding Loans: Besides above mentioned documents, a borrowing firm must also disclose its outstanding loans, if any, along with necessary details. These may include,

Lender name
Date of loan taken
Loan amount
Loan tenure
Repayment terms

KYC Process: KYC is an essential part of any financing deal. For this, an applying business must furnish necessary KYC documents for authentication purposes. These would ideally include,

CIN
GST certificate
Company PAN card
Cancelled cheque
Aadhar card of all Directors
Pan card of all Directors

Besides these, to keep the process simple, GoKwik has already defined negotiation terms so as to close the deals as soon as possible and disseminate loans to interested forms. For more information, contact GoKwik.

Conclusion

Because it primarily focuses on helping brands grow and realise their potential, growth financing is increasingly becoming the go-to capital borrowing scheme in India. Companies like ours is also focused towards ensuring that Indian eCommerce brands scale higher and quicker and worry least about their capital needs. GoKwik, with its Growth Financing solution, wants to empower businesses to move forward, explore new markets and become million dollar companies. Growth Financing by GoKwik is also highly suitable because it demands no collateral, no equity dilution, zero upfront fee or hidden charges, complies with fixed repayment cycles and a loan tenure that’s more than any other financing solution in the market operating under such terms and conditions.

If you too are looking for funding without meaning to dilute your equity and maintain complete control over your business, Gokwik’s Growth Financing solution is what you need.

Get in touch today to unlock growth opportunities!

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AUTHOR

Suhag Vamja

Head of Product Marketing @ GoKwik

AUTHOR

Suhag Vamja

Head of Product Marketing @ GoKwik

Suhag spearheads D2C growth strategies at GoKwik, focusing on e-commerce optimisation, conversion funnels, and sales enablement. Based in Bengaluru and an MICA alumnus, he excels in crafting GTM playbooks and marketing campaigns tailored for D2C brands.

The Ultimate Guide To Growth Financing

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Read this blog on your favourite platform

What Is Capital?

Equity Investment Vs Debt Financing Vs Growth Financing

Difference Between Equity Investment Vs Debt Financing Vs Growth Financing

Growth Financing By GoKwik

Criteria For Qualifying Businesses

Documentation And Financial Information

Conclusion

Frequently Asked Question

Suhag Vamja

Suhag Vamja