Want to Start a Small Finance Company? Here’s How
Finding funding is always a difficult road to commence on as there may come so many hurdles in the way. Whether it’s about taking loans or it’s about starting off with a business venture, taking financial help from a recognized institution is the obvious thing that one thinks about in need of funding.
The vibrant economy of India is witnessing a remarkable evolution in the financial services industry with the intervention of several finance companies or financial technologies (aka Fintech). Therefore, starting a financial company is the new road that many finance-entrepreneurs are taking.
If this sounds fascinating to you, then keep on reading this article as here we tell you everything about starting a finance business in India.
What Do Finance Companies Do?
Before starting with the business, get a thorough understanding of what finance companies actually do. Some finance companies lend to consumers, while others make loans to businesses or finance the sale of manufacturers’ products to customers. Finance companies are separate entities from banks as they do not take deposits from the public and are not subjected to strict banking regulations. Finance companies base their loans on the value of the assets that the borrowers pledge as security. They obtain funds for lending through their own borrowing or parent corporations.
In order to start a small finance company in India, there are a few steps to be followed. These steps are as follows:
1. Deciding the business structure:
There are three main types of business structure on which a finance company could be operated. These are One Person Company, Limited Liability Partnership, and Private Limited Company. Choose the one that fits your business type and your own preference.
2. Registering for GST:
The finance business is required to register for GST and obtain a GST identification number for the business. The GST regime combines new taxes along with the old indirect taxes too.
3. Getting Legal Documents:
To start a finance business, it is important to get the legal documents prepared so that the business gets all the recognition. You can consult with a startup lawyer who could assist you in drafting the legal documents as per the requirements of your business.
4. Obtaining Intellectual Property:
Obtaining intellectual property refers to patenting and copyrighting your business idea and all the other symbols associated with it such as trademark. With all these rights, you can protect your business idea by registering them on your name.
5. Obtaining Licensing:
Licensing and regulation of a finance company depend upon the type of service it provides. You need a license to provide any of the financial services in any manner. Therefore, licensing of the business becomes quite an important thing to be done.