How to raise debt financing when you don't want to dilute equity

Equity is the most expensive capital you can raise because it never has to be paid back — which means you pay for it with ownership, forever. For many growing companies, debt is a better answer than equity, and it's more accessible than most founders realise.

Types of debt available to established Indian SMEs: term loans (traditional bank loans for capex or working capital), working capital facilities (overdraft against receivables, a cash credit limit), invoice discounting (advance against outstanding invoices — typically 70–80% of invoice value), equipment finance (if you're buying machinery or assets), and NBFC lending (for companies that don't qualify for bank rates — faster but more expensive).

What banks look for: 3 years of audited financial statements, positive cash flow, reasonable debt-to-equity ratio, collateral (either property or receivables), and a clear repayment plan. If your financials are clean and your revenue is consistent, debt is very accessible.

Fintech lenders and NBFCs like Lendingkart, FlexiLoans, and NeoGrowth have made debt more accessible for smaller companies without traditional collateral — typically at 18–28% annual interest. More expensive than banks (10–14%), but faster and less paperwork.

CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) provides government-backed guarantees that allow banks to lend without collateral up to ₹2Cr. If you're MSME registered and your CA isn't talking to you about CGTMSE, ask them to.

The right time to take on debt is before you desperately need it. Build banking relationships when your financials are strong, get a working capital facility sanctioned, and draw on it when you need it.