How to Start a Dropshipping Business and Secure Financing for It

Starting a dropshipping business in India can be easy if you follow a clear, structured approach. 

Here’s how to begin:

1. Research the Market

To understand how to start a dropshipping business, begin by studying market trends, identifying niche products, and assessing competition. Focus on popular product categories that have steady demand but aren't oversaturated with suppliers.

2. Select a Profitable Niche

The dropshipping model works best when you select a profitable niche. Whether it’s electronics, clothing, or beauty products, choosing a niche that aligns with consumer interests and local demand can help drive traffic and sales.

3. Find Reliable Suppliers

Partnering with reliable suppliers is crucial. Research potential suppliers on trusted online platforms or local Indian suppliers. Ensure they have a solid reputation for fulfilling orders accurately and on time.

4. Create a Business Plan

Develop a comprehensive business plan that outlines your goals, target audience, product selection, marketing strategy, and financial projections. This plan will help you stay focused and organised as you grow your business.

5. Register Your Business

In India, it’s important to register your business under a legal entity, such as a sole proprietorship or private limited company. You’ll also need to apply for a Goods and Services Tax (GST) registration if your turnover exceeds ₹20 lakhs.

6. Set Up an Online Store

Create an e-commerce website using platforms like Shopify, WooCommerce, or Wix. Design a user-friendly online store that clearly displays your products, prices, and policies to make it easy for customers to shop.

7. Market Your Business

Once your store is up and running, focus on marketing strategies such as SEO, social media marketing, and paid advertising to drive traffic to your site. Influencer collaborations and content marketing are also effective for building brand awareness.

8. Monitor and Optimise

Track key performance indicators (KPIs) such as website traffic, conversion rates, and customer satisfaction. Use this data to optimise your marketing strategies, customer service, and product offerings.

Starting a dropshipping business in India involves a few key legal steps to ensure compliance with local regulations. While online businesses, especially dropshipping, have fewer licensing requirements compared to traditional businesses, it's still important to register your business properly and secure any necessary licenses.

Here are the details: 

Business Registration

For a dropshipping business, the legal structure you choose will determine the registration process. If you opt for a sole proprietorship, there is no formal registration with the Ministry of Corporate Affairs (MCA); you only need a PAN card and, in some cases, local registrations depending on your city. However, if you choose to operate as a partnership, limited liability partnership (LLP), or private limited company, you must register with the MCA. The structure you choose should align with your business goals and scale.

GST Registration

GST registration is required for dropshipping businesses if your annual turnover exceeds ₹40 lakhs (for goods) or ₹20 lakhs (for services) in most states. However, in some special categories or states (e.g., North East states), the threshold could be as low as ₹10 lakhs. Even if your turnover is below the threshold, some e-commerce platforms require GST registration to list products and process payments. This registration allows you to collect taxes from customers and claim input tax credits for your business expenses.

Trade License

While many online businesses do not require a trade license, it’s advisable to check with your local municipal authorities, as some cities (such as Mumbai and Delhi) may require one, especially if you operate from a physical address. A trade license is typically necessary for businesses engaged in commercial activities, even if those activities are primarily conducted online.

Import/Export License (IEC)

If your dropshipping business involves importing goods from overseas or selling internationally, you will need an Import Export Code (IEC). The IEC is issued by the Directorate General of Foreign Trade (DGFT) and is required for both importing and exporting products. It’s essential for any business involved in cross-border trade, ensuring that your international transactions comply with Indian trade regulations.

FSSAI License (if selling food products)

If your dropshipping business includes selling food products, a Food Safety and Standards Authority of India (FSSAI) license is required. For smaller-scale operations, a basic FSSAI registration may suffice, but larger businesses may need a more comprehensive license. This ensures that your food products meet the safety standards established by the government and are safe for consumers.

Other Industry-Specific Licenses

Depending on the products you plan to sell, you may need additional licenses. For example, businesses selling medicines or health supplements must obtain approvals from regulatory bodies like the Drug Controller General of India (DCGI). Additionally, all dropshipping businesses must comply with consumer protection laws and adhere to platform-specific rules (such as those set by Amazon, Flipkart, etc.) to ensure fair trade practices.

Effective financial planning is crucial for maintaining cash flow, managing operational costs, and securing the necessary funding to grow your dropshipping business. Here’s how to approach financial planning for your business:

Budget Estimation

Begin by estimating the total costs involved in starting and running your dropshipping business. This includes costs for setting up an e-commerce platform, marketing, purchasing product samples, and paying for logistics and supplier fees. A detailed budget helps you avoid unexpected financial strain and ensures you’re prepared for both short-term and long-term expenses.

Cash Flow Management

Proper cash flow management is vital to ensure your business stays solvent. Keep track of all income and expenses, including supplier payments, customer refunds, and marketing costs. A steady cash flow allows you to pay for operating expenses on time, manage seasonal fluctuations, and invest in business growth.

Working Capital Requirement

Ensure you maintain enough working capital to handle unforeseen expenses, such as changes in supplier prices, shipping delays, or a sudden increase in demand. Having sufficient working capital prevents disruptions and allows you to scale operations without financial hiccups.

Business Loan Application

If you need funding to cover initial costs or business expansion, look for financing options through financial marketplaces like Bajaj Markets. A business loan can help you cover essential expenses like marketing campaigns, website upgrades, or inventory management tools.

Credit Score Review

Before applying for a loan, review both your personal and business credit scores. A strong credit score improves your chances of securing a loan with favourable terms, such as lower interest rates and more flexible repayment options.

Investor Partnerships

For larger-scale growth, consider seeking partnerships with investors. Bringing in external capital can help you expand your product offerings, invest in digital marketing, and enhance your customer service capabilities.

Government Schemes

Explore government schemes available for small businesses or MSMEs, such as micro-loans or subsidies, which can provide financial relief and support your growth in the competitive e-commerce landscape.

Emergency Reserve

Set aside an emergency fund for unforeseen expenses or unexpected market conditions. This reserve ensures you don’t have to dip into your regular business funds when times get tough.

Profit Reinvestment

Reinvest a portion of your profits into growing your business. Whether it's expanding your product range, improving customer service, or investing in new technology, reinvesting profits helps you build a stronger foundation for the future.

Financial Consultation

Seek advice from financial planners or business consultants to help you make informed decisions about funding, budgeting, and investments. Professional guidance can help you avoid costly mistakes and ensure your business remains financially sustainable.

Securing the right business loan can provide your dropshipping business with the funds needed to scale effectively. Bajaj Markets offers a range of business loan options from trusted lenders, each designed to suit your specific needs.

Here’s how:

• High Loan Amounts

Lenders on Bajaj Markets offer loan amounts up to ₹80 Lakhs, depending on your business’s requirements. This allows you to cover expenses such as product inventory, digital marketing campaigns, software, and other operational costs.

• Quick Disbursal

Once approved, the loan amount is swiftly transferred to your account. The quick disbursal helps you avoid delays, enabling you to take immediate action when needed, such as capitalising on a market opportunity or upgrading your online store.

• No Collateral Required

Many of the loans offered on Bajaj Markets are unsecured, meaning you don’t have to pledge assets like property or inventory. This makes it easier for small and medium-sized dropshipping businesses to access financing without risking valuable assets.

• Flexible Repayment Tenures

Repayment tenures can be customised to fit your business’s cash flow, with options for flexible repayment periods up to 96 months. This flexibility ensures that you don’t experience financial strain while repaying the loan.

• Transparent Charges

All fees and charges are clearly communicated upfront. There are no hidden costs or surprises, allowing you to plan your finances effectively and manage your budget without unexpected financial burdens.

• Competitive Interest Rates

Interest rates for business loans on Bajaj Markets start at 14% per annum, making it a cost-effective option for dropshipping businesses looking for affordable financing. The competitive rates help you minimise borrowing costs while maintaining healthy profit margins.

• Simple Online Process

Applying for a business loan is simple and hassle-free through Bajaj Markets. You can complete your application from the comfort of your home or office, saving time and effort. The process is easy, requiring only a few easy steps.

Securing a business loan can be a strategic move to fund your dropshipping business and support its growth. 

Here’s how you can use a business loan effectively:

Website Development and Maintenance

A professional, user-friendly e-commerce website is essential for your dropshipping business. A business loan can help you cover the costs of website design, development, and ongoing maintenance, ensuring your site remains functional and attractive to customers.

Digital Marketing and Advertising

Marketing is crucial for attracting customers to your store. Use a business loan to fund digital marketing campaigns across platforms like Google Ads, Facebook, Instagram, and influencer partnerships. This will help you build brand awareness and drive traffic to your website.

Inventory Management Tools

While dropshipping doesn’t require you to hold physical inventory, it’s essential to have robust software tools for tracking orders, managing suppliers, and keeping inventory records. A business loan can be used to invest in tools that streamline these processes, ensuring smooth operations.

Product Samples and Testing

Before listing products on your website, it's advisable to order samples to check quality and ensure they meet your standards. You can use loan funds to purchase samples from suppliers to evaluate the products you plan to offer your customers.

Customer Service Infrastructure

Offering excellent customer service is key to building trust and retaining customers. A business loan can help you invest in customer service platforms, hire customer support staff, or set up live chat functions on your website, improving your customer engagement.

Business Expansion

If your dropshipping business is growing, you might want to expand your product range or target new markets. You can use the loan funds to explore new product categories, launch in different regions, or increase your online presence through additional advertising or SEO efforts.

When applying for a business loan for your dropshipping business, your credit score and company credit report (CCR) play a significant role in determining your eligibility. These factors help lenders assess the financial health and creditworthiness of both you as an individual and your business. 

Here's what you need to know:

Credit Score (CIBIL Score)

A strong CIBIL score can improve your chances of getting a loan approval with better terms, including lower interest rates. For a dropshipping business loan, a score of 650 or above is typically required. A higher score indicates a history of timely payments, lower risk for lenders, and better financial management. If your score is below 650, it may still be possible to secure a loan, but you may face higher interest rates or stricter conditions.

Company Credit Report (CCR)

Applying for a business loan through Bajaj Markets is designed to be quick and hassle-free. Just follow these simple steps to get started:

1. Start by clicking on the ‘Apply Now’ button on this page to begin the loan application process.
   

2. You’ll need to provide basic details about yourself and your dropshipping business. This includes personal identification information, your business registration details, and financial information about your business.
   

3. Indicate the amount of funding you need for your business, along with your preferred repayment tenure. You can select a tenure that suits your business’s cash flow, ensuring manageable repayments over time.
   

4. Once you’ve filled out the form with accurate details, submit it for verification.

The Indian government offers a variety of schemes to support SMEs and MSMEs, including those in the dropshipping business sector. These schemes provide financial assistance, collateral-free loans, and subsidies that help businesses grow and comply with regulatory requirements.