Know how to start a dropshipping business in India and secure financing with a business loan, including essential steps and tips for success in the industry.
Starting a dropshipping business in India offers an attractive opportunity for entrepreneurs due to its low initial investment and minimal risk. Unlike traditional retail businesses, dropshipping allows you to sell products without holding inventory, making it an appealing option for new business owners.
With the right approach, effective strategies, and strong financial planning, you can establish a profitable dropshipping business. Understanding how to start dropshipping, securing financing, and building a robust customer base are key components of success.
By navigating the logistics, choosing the right suppliers, and mastering digital marketing techniques, you can ensure your business thrives in the competitive e-commerce landscape. This article will guide you through each step, from launching your business to securing funding for growth.
Starting a dropshipping business in India can be easy if you follow a clear, structured approach.
Here’s how to begin:
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.
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.
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.
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.
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.
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.
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.
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:
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 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.
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.
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.
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.
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.
Starting a dropshipping business in India involves minimal upfront costs compared to traditional retail businesses. However, the exact expenses will depend on your chosen product niche, marketing strategies, and business scale.
Below is an estimated cost breakdown to give you an idea of what to expect:
Operating in major cities typically comes with higher costs due to office space rentals, higher staff salaries (if applicable), and the need for more competitive marketing strategies. However, these cities also offer a larger customer base, which can lead to higher sales potential.
Estimated Setup Costs in Tier 1 Cities
| Setup Type | Cost Estimate |
|---|---|
Basic Online Store Setup |
₹25,000 - ₹50,000 |
Medium Business Setup (E-commerce platform, initial marketing) |
₹50,000 - ₹1,00,000 |
Advanced Business Setup (including influencer collaborations, advanced tools) |
₹1,00,000 - ₹2,00,000 |
Tier 2 cities offer lower operational costs, making them an attractive option for new entrepreneurs. Lower rents and more affordable marketing can help reduce initial investment while still providing access to a growing market.
Estimated Setup Costs in Tier 2 Cities
| Setup Type | Cost Estimate |
|---|---|
Basic Online Store Setup |
₹20,000 - ₹40,000 |
Medium Business Setup |
₹40,000 - ₹80,000 |
Advanced Business Setup |
₹80,000 - ₹1,50,000 |
For entrepreneurs looking to start small, Tier 3 cities provide the most cost-effective option. With lower rents, staff expenses, and marketing costs, these locations offer significant savings. However, the market size may be smaller than in Tier 1 or Tier 2 cities.
Estimated Setup Costs in Tier 3 Cities
| Setup Type | Cost Estimate |
|---|---|
Basic Online Store Setup |
₹15,000 - ₹30,000 |
Medium Business Setup |
₹30,000 - ₹60,000 |
Advanced Business Setup |
₹60,000 - ₹1,00,000 |
Summary
Tier 1 Cities: High investment with larger customer bases and faster scaling
Tier 2 Cities: Balanced investment with a good market for growth
Tier 3 Cities: Low setup costs, ideal for small-scale operations and gradual growth
Disclaimer: The figures provided are indicative and may vary depending on factors such as your product niche, marketing strategy, and business scale. Consult industry experts or financial advisors before making any investment decisions.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
Securing the right funding is crucial for growing your dropshipping business. Here are some leading financial institutions offering business loans on Bajaj Markets to help you finance your business needs:
| Partner | Starting Interest Rate (p.a.) | Max. Loan Amount | Processing Fee |
|---|---|---|---|
16.5% |
30 Lakhs |
Up to 2.5% |
|
22% |
10 Lakhs |
3% to 4% of the loan amount + GST |
|
20% |
2 Lakhs |
3% |
|
29.5% |
2 Lakhs |
Up to 2% |
|
14% |
80 Lakhs |
Up to 4.72% of the loan amount (Inclusive of applicable taxes) |
|
22% |
10 Lakhs |
Upto 4.72% (Inclusive of applicable taxes) |
|
18% (reducing) |
50 Lakhs |
Up to 2.5% of the loan amount |
|
24% |
3 Lakhs |
2% to 5% of the loan amount |
|
22% |
30 Lakhs |
Up to 3% of the loan amount + GST |
|
18% |
30 Lakhs |
3% to 4.25% |
|
15.5% |
75 Lakhs |
Up to 2% + GST |
|
19.2% |
35 Lakhs |
Up to 3% of the loan amount + GST |
|
20.5% |
35 Lakhs |
1% - 6% |
|
24% |
50 Lakhs |
Nil |
|
16% |
50 Lakhs |
Up to 3% of the loan amount |
Disclaimer: The loan amounts, interest rates, tenures, and processing fees mentioned above are indicative and may vary based on the lender’s policies, applicant’s profile, and prevailing market conditions.
Securing a business loan for your dropshipping business is straightforward once you understand the eligibility criteria and gather the necessary documents. Here’s what you’ll typically need to qualify and apply smoothly:
While different lenders may have specific requirements, these are the standard criteria you’ll need to meet when applying for a dropshipping business loan:
Nationality
You must be an Indian citizen with valid identity proof, such as a PAN card or Aadhaar card.
Age
You must be at least 21 years old at the time of application. Lenders usually prefer applicants within the age range of 21-65 years.
Business Type
Your dropshipping business must be registered, whether as a sole proprietorship, partnership, limited liability partnership (LLP), or private limited company.
Business Experience
Lenders typically prefer businesses with at least 6 months of operational history. For new businesses, alternative criteria may be considered, such as personal creditworthiness or collateral.
Annual Turnover
While not always mandatory, lenders generally prefer a minimum annual turnover of ₹2 lakhs to demonstrate business viability and financial stability. However, new businesses with promising business models may still qualify.
Self-Employment
You should be self-employed and actively running your dropshipping business. If you are working in partnership with others, their involvement should be clearly outlined.
Credit Score
A good credit score improves your chances of approval. A CIBIL score of 650 or above is generally considered favourable, helping you secure better interest rates and loan terms.
Having the right documents ready will help you speed up the loan application process and avoid any delays.
Here’s a list of the key documents you will typically need when applying for a dropshipping business loan:
| Document Type | Documents Needed |
|---|---|
Identity Proof |
PAN Card, Aadhaar Card, Passport, Voter ID, or Driving Licence |
Address Proof |
Utility Bill (electricity, water, or gas), Bank Statement (last 6 months), Passport-size Photograph |
Business Proof |
Partnership Deed, LLP Agreement, Certificate of Incorporation, GST Registration Certificate, Rental or Lease Agreement |
Income Proof |
Latest Income Tax Returns (ITR), Audited Balance Sheet, Profit & Loss Statement |
Additional Documents |
Business Bank Account Statement, Proof of Business Establishment (if applicable) |
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:
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.
If your dropshipping business is registered as an LLP, partnership, or private limited company, your business’s Company Credit Report (CCR) will also be reviewed. This report assesses the financial health of your business based on its credit history, outstanding debts, payment behaviours, and financial performance. A good CCR shows that your business has been managing its finances well, making it more likely to be approved for a loan.
If your credit score or CCR is not ideal, it’s important to take steps to improve them before applying for a loan. You can improve your credit score by paying off any existing debts, ensuring timely payments for bills and other financial obligations, and correcting any inaccuracies in your credit report. Improving your business's financial health, such as paying suppliers on time and reducing debt, can also have a positive impact on your business credit report.
Applying for a business loan through Bajaj Markets is designed to be quick and hassle-free. Just follow these simple steps to get started:
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.
Scheme Type |
Scheme Name |
Central Government Schemes |
Udyam Registration |
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) |
|
PM Vishwakarma Scheme |
|
Public Procurement Policy for MSEs |
|
Trade Receivables Discounting System (TReDS) |
|
RAMP (Raising and Accelerating MSME Performance) |
|
International Cooperation Scheme |
|
State Government Schemes |
Maharashtra Udyogini Scheme: Provides loans for women entrepreneurs. |
Tamil Nadu MSME Credit Guarantee Scheme: State-backed credit for MSMEs. |
|
Gujarat Industrial Policy 2020: Offers interest subsidies and other incentives for MSMEs. |
|
Karnataka Elevate: Seed funding for innovative startups and MSMEs. |
|
Other State Schemes: Most states have their own MSME financing programs, including interest subsidies, credit guarantees, and support for technology adoption. Eligibility and benefits vary by state and sector. |
Notes:
Dropshipping businesses must be registered as MSMEs (Udyam) to access most of these schemes.
State schemes are regularly updated; always check the official state portal for the latest details and deadlines.
Choose a niche, find reliable suppliers, set up an e-commerce store, and market your products online. Focus on customer service and optimising your website for conversions.
The cost can range from ₹25,000 to ₹80,000, covering website setup, marketing, domain registration, and product samples, depending on your business scale and strategy.
Dropshipping can be profitable with the right product selection, marketing, and supplier relationships. Profit margins typically range from 10% to 30%, depending on efficiency and scale.
Research trending niches, use tools like Google Trends, and select products with high demand, low competition, and reliable suppliers offering competitive prices and fast shipping.