What Are the Best Non-Dilutive Startup Capital Options in India?

Non-dilutive Funding is the type of funding that enables startups to raise money without having to lose a significant ownership stake. But the repayment terms, eligibility and costs of various instruments vary.

1. Venture Debt

Venture debt is typically most appropriate for startups that have institutional investor support, typically after Series A or in the growth phase. It can cover expansion, working capital, equipment, acquisitions and the time between equity rounds.

2. Revenue-Based Financing

Revenue based financing is intended for sales companies that have steady month to month income. The repayment is typically based on a percentage of the sales made every month until the agreed repayment amount is made.

In India, the platforms are GetVantage, Klub, Velocity, N+1 Capital, Recur Club and Efficient Capital Labs. Business profile and provider may vary the facility from Rs 10 lakh to Rs 10 crore or higher.

This is an option that could be applicable to subscription-based businesses, as well as other businesses that have steady revenue and SaaS businesses. But the effective annualised cost should be taken into account and the monthly deduction should be considered and its implications on working capital should be taken into account by the founders.

3. Government Schemes Supporting Startup Financing

Government-backed programmes can help get the funding for startups who qualify. They are different in structure and not all schemes offer direct loans.

Startup India Seed Fund Scheme (SISFS)                                                                     

The Startup India Seed Fund Scheme was conceived for proof of concept, prototype development, product trial and market entry/commercialisation of startups. So far, the amount of money that eligible startups can get as a grant for proof-of-concept activities is Rs 20 lakh and market entry and commercialisation is Rs 50 lakh through convertible debentures or debt.

The application form for startups has been closed. The last extended deadline was May 31, 2026 and the last deadline for the incubators to complete the process of selecting startups was June 30, 2026. The Founders should ensure that they have taken a look at the official Startup India portal to look for any additional announcements or additional rounds of applications.

Credit Guarantee Scheme for Startups (CGSS)

The Credit Guarantee Scheme for Startups facilitates access to collateral free loan facilities by availed by the eligible lending institutions against the startups recognised by DPIIT and provides guarantee cover for them.

The new scheme allows for coverage of eligible loans of Rs 20 crore per borrower through debt facilities. The scheme offers the following for transaction based guarantee cover:

• 85% guarantee cover on the amount in default for loans up to Rs 10 crore.
• 75% guarantee cover on the amount in default for loans exceeding Rs 10 crore.

The scheme operates through eligible member institutions, including scheduled commercial banks, qualifying NBFCs and venture debt funds under SEBI-registered AIFs. Startups do not receive the guarantee directly. They must approach an eligible lending institution, which assesses the proposal and applies for the applicable cover.

Startup India Fund of Funds 2.0

In April 2026, the government announced that Startup India Fund of Funds 2.0 with Rs 10,000 crore of corpus. Its purpose is to catalyse venture/growth capital for startups, particularly for deep tech, technology-driven innovative manufacturing and early growth stage businesses.

SIDBI is the implementing agency, the scheme works through committing capital to SEBI-registered AIFs. These funds then assess and invest in start-ups. It thus is not a lending or grant scheme for entrepreneurs.

4. Bank and NBFC Loans

Bank/NBFC loans may be suitable for businesses with established revenue and receivables, inventory and/or assets to borrow against. Companies can use the working-capital facilities, term loans and invoice financing for the management of operating expenses, cash-flow requirements.

5. Convertible Instruments

Convertible instruments provide capital that may convert into equity at a later stage, subject to agreed terms. Although they can defer immediate valuation negotiations, they are not completely non-dilutive because conversion may reduce existing shareholders' ownership.