One Person Company Funding: How Can an OPC Raise Funds in India?

Key Takeaways

• An OPC can raise funds through its sole member’s capital, loans, debentures, government-backed credit, and eligible grants. However, it cannot bring in outside equity investors while retaining its OPC structure.
• The sole member can invest additional share capital. Loans from a director may qualify for exclusion from deposits if the director provides the required written declaration and the company discloses the loan in its Board’s report. 
• Bank and NBFC loans can help an OPC access external funding without diluting ownership. Collateral-free cover is available through CGTMSE (up to ₹10 crore for micro and small enterprises) or CGSS (up to ₹20 crore for DPIIT-recognized startups).
• An OPC can issue non-convertible debentures through private placement, subject to applicable legal requirements. These debentures must not convert into shares.
• A DPIIT-recognized OPC can apply for grants such as the Startup India Seed Fund Scheme (up to ₹20 lakh), NIDHI, iDEX, and state startup policies, subject to each scheme’s eligibility criteria.

OPC Funding Options at a Glance: Where Can an OPC Get the Capital From?

The table below compares the main funding options available to an OPC, including their impact on ownership and the key conditions to consider.

Funding option	Available to an OPC?	Dilutes ownership?	Key condition
Capital from the sole member	Yes	No	Increase authorized capital and file Form SH-7 if needed, then report the allotment in Form PAS-3
Loans from the director or relatives	Yes	No	Written declaration that the funds aren’t borrowed, plus disclosure in the Board’s report
Bank and NBFC loans	Yes	No	Lender’s credit assessment; a personal guarantee is often required
CGTMSE loans	Yes, if registered as a micro or small enterprise	No	Udyam registration; guarantee cover up to ₹10 crore through participating lenders
Non-convertible debentures	Yes	No	Issued through private placement; must not convert into shares
MUDRA loans	Yes, if the lender accepts companies	No	Loans of up to ₹20 lakh; confirm eligibility with the lender
Internal accruals	Yes	No	Limited to the profits the business generates
Grants (NIDHI, iDEX, state schemes)	Yes, if the scheme accepts companies	No	Varies by scheme, e.g., NIDHI-SSS needs incubator residency; iDEX needs Udyam or DPIIT status
Angel or VC equity funding	No, until conversion	Yes	Convert to a private limited company first
ESOPs and convertible instruments	No, until conversion	Yes	Convert to a private limited company first

How Can an OPC Raise Funds? Available Funding Options

An OPC can raise funds through its owner’s capital, business loans, and other non-equity sources. However, unlike a Private Limited Company, it cannot bring in equity investors while remaining an OPC because the law limits it to a single member (Section 2(62) of the Companies Act, 2013).

A One Person Company can fund its business through these options:

1. Capital From the Sole Member

One of the simplest ways to fund an OPC is for the sole member to invest additional money in exchange for more shares. This increases the company’s capital without creating debt or repayment obligations. The process involves:

• Checking authorized capital: If the new shares would exceed the OPC’s authorized share capital, the company must increase it first and file Form SH-7 with the Registrar of Companies (RoC) within 30 days of the alteration.
• Allotting the shares: The business allots new shares to the sole member against the additional investment.
• Reporting the allotment: The OPC files Form PAS-3 with the RoC within 30 days of the allotment, as required by Section 39(4) of the Companies Act, 2013.

Best for: Founders with personal funds who want to strengthen the company’s capital base without taking on debt.

2. Unsecured Loans From the Director or Relatives

If the founder does not want to add more share capital, the OPC can borrow from its director or the director’s relatives. Under Rule 2(1)(c)(viii) of the Companies (Acceptance of Deposits) Rules, 2014, a loan from a director or their relative is excluded from deposits if:

• The lender is a director, or a relative of a director: The exclusion covers money received from a person who was a director of the company when the money was received. Money from a director’s relative is also excluded, but only for Private Companies, which include OPCs.
• The lender gives a written declaration: It must state that the money is the lender’s own and not borrowed from others.
• The OPC discloses the loan: The amount must appear in the company’s Board report.

Best for: Founders who want to fund the OPC from personal or family funds, without issuing shares or approaching external lenders.

3. Bank and NBFC Business Loans

An OPC can apply for business loans from banks and Non-Banking Financial Companies (NBFCs) to cover major expenses or manage day-to-day operations. The main options include:

• Term loans: Used for one-time expenses such as purchasing equipment, setting up premises, or expanding the business. The borrower repays the loan over a fixed period.
• Working capital facilities: Cash credit and overdraft facilities help cover routine expenses, maintain inventory, and manage gaps between payments and receivables.

Before approving a loan, lenders assess the OPC’s financial statements, cash flow, credit history, and repayment capacity. They may also ask the founder to provide a personal guarantee.

Best for: OPCs with steady revenue and enough cash flow to manage interest payments and regular repayments.

Note: Under Section 179(3)(d) of the Companies Act, 2013, borrowing money requires a Board resolution. In an OPC with only one director, Section 122(4) treats the resolution as passed once the director records it in the minutes book and signs and dates it. 

Private companies, including OPCs, are also exempt from Section 180 under the MCA notification dated June 5, 2015. Therefore, the Section 180(1)(c) limit, which caps borrowing at the company’s paid-up capital plus free reserves, does not apply to an OPC, and it does not need a special resolution to borrow beyond that limit.

4. Collateral-Free Loans Under CGTMSE

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) helps eligible small businesses access loans without pledging collateral. It provides a guarantee to the lender for a portion of the loan, reducing the lender’s risk and making credit more accessible. Key features include:

• Eligibility: The OPC must qualify as a micro or small enterprise and meet the scheme’s requirements. 
• Loan limit: Eligible credit facilities of up to ₹10 crore per borrower can be covered under the scheme, subject to applicable terms.
• Where to apply: The OPC can approach a bank or other eligible lending institution participating in the scheme. The lender applies to CGTMSE for guarantee coverage.

Best for: OPCs that need business credit but don’t have property or other assets to offer as collateral.

5. Non-Convertible Debentures

An OPC can raise debt by issuing Non-Convertible Debentures (NCDs) through private placement, subject to applicable legal requirements. NCD holders lend money to the company in return for interest and become creditors, not members. Key points include:

• No change in ownership: NCD holders do not receive shares, so the OPC retains its single-member structure.
• Must remain non-convertible: Debentures that convert into shares could introduce another member, which an OPC cannot have.
• Deposit rules apply: Under Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014, debentures are excluded from the definition of a deposit only if they meet specified conditions. These include being secured by a first charge, or a charge ranking pari passu with the first charge, over the company’s assets (excluding intangible assets), or being unsecured, non-convertible, and listed on a recognized stock exchange in accordance with SEBI regulations. An unlisted, unsecured NCD generally qualifies as a deposit, which an OPC cannot accept from the public.
• Compliance applies: The issue must comply with the applicable private placement and debenture provisions of the Companies Act, 2013.

Best for: Established OPCs that can attract lenders and manage the compliance requirements, interest payments, and repayment obligations associated with an NCD issue.

6. Government-Backed Loan Schemes 

Beyond CGTMSE, an OPC can explore the Pradhan Mantri MUDRA Yojana (PMMY), which offers collateral-free loans through banks, NBFCs, and microfinance institutions:

Category	Loan amount
Shishu	Up to ₹50,000
Kishore	Above ₹50,000 to ₹5 lakh
Tarun	Above ₹5 lakh to ₹10 lakh
Tarun Plus	Above ₹10 lakh to ₹20 lakh, for borrowers who have repaid a previous Tarun loan

MUDRA is designed for non-corporate micro enterprises, so many lenders do not offer it to companies. An OPC should confirm eligibility with the lender before applying, and may find CGTMSE-backed credit easier to access.

Best for: Small OPCs that need modest working capital or equipment finance without pledging collateral.

7. Internal Accruals

An OPC can fund its growth by reinvesting profits instead of distributing them. This allows the company to use its earnings to:

• Expand operations: Open new locations, hire staff, or enter new markets.
• Buy assets: Invest in equipment, technology, or inventory.
• Fund working capital: Cover day-to-day expenses without relying on credit.

Since the company uses its own earnings, this approach avoids interest costs and additional debt. However, the amount available depends on how much profit the business generates, so OPCs with higher funding needs may need to combine retained earnings with loans.

Best for: Profitable OPCs that want to grow steadily without taking on debt or changing their ownership structure.

Can an OPC Get Grant Funding in India?

An OPC can get grant funding if it meets a scheme’s eligibility criteria. Since an OPC is a private company under the Companies Act, 2013, it can also obtain DPIIT startup recognition, which opens most central and state startup grants.

Some options include:

Scheme	Funding available	Key eligibility for an OPC
NIDHI-PRAYAS (Department of Science and Technology)	Up to ₹10 lakh per innovator to build a prototype	Apply through a DST-supported PRAYAS Centre at an incubator
NIDHI Seed Support System (Department of Science and Technology)	₹25 lakh to ₹1 crore per startup	Registered Indian company; at least 3 months of residency at a DST-supported incubator; at least 51% Indian shareholding
iDEX SPARK (Support for Prototype and Research Kickstart) grant (Ministry of Defence)	Up to ₹1.5 crore for defense and aerospace innovation	Udyam-registered MSME or DPIIT-recognized startup, selected through an iDEX challenge
iDEX Prime (Ministry of Defence)	Up to ₹10 crore for advanced defense technology projects	Same as SPARK, for larger and more complex challenges
State startup policies	Seed grants, rent subsidies and reimbursements, depending on the state	State startup recognition or DPIIT recognition, plus registration in that state

Note: An OPC can take the grant portion of SISFS and the pure-debt options under SISFS or NIDHI-SSS. Any support offered as equity or convertible debentures requires conversion into a private limited company first.

Why Can’t an OPC Raise Equity Directly?

Equity funding involves issuing shares to investors, who then become members of the company. Since an OPC can have only one member, it cannot issue shares to outside investors while retaining its OPC status.

This restriction limits three common funding routes:

• Angel and venture capital investment: These investors fund a business in exchange for an equity stake.
• ESOPs and sweat equity: Employees who receive shares would become members.
• Convertible instruments: Compulsorily convertible debentures and convertible notes eventually turn into shares.

How Can an OPC Raise Funds for Expansion?

When owner contributions and loans are no longer enough, an OPC may need to convert into a private limited company to attract equity investors. A private limited company can have up to 200 members, allowing it to raise equity from angel investors and venture capital funds, offer ESOPs, and issue eligible convertible instruments.

Since April 1, 2021, an OPC can convert at any time without a two-year waiting period or minimum paid-up capital or turnover requirement. The process involves these steps:

1. Add a second member and director to meet the minimum requirements for a private limited company.
2. Pass the required board and special resolutions to approve conversion and amend the MOA and AOA. 
3. File Form INC-6 with the required documents. Once approved, the RoC issues a fresh Certificate of Incorporation reflecting the new company type.

The company retains its identity, so its PAN, TAN, and business history generally continue. For the detailed procedure, see RegisterKaro’s guide on conversion of an OPC to a Private Limited Company.

Documents and Preparation Before Raising Funds for an OPC

Banks, lenders, and government funding schemes assess an OPC’s legal status, financial health, and ability to repay before approving funds. Preparing the following documents in advance can speed up approval:

• Company documents: Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), PAN, and TAN.
• Registrations: GST registration, where applicable, and Udyam registration for eligible MSME benefits and schemes, including CGTMSE-backed credit.
• Financial records: Audited financial statements and income tax returns for the last two to three years, where available, along with six to 12 months of bank statements.
• Business plan: A project report outlining the funding purpose, estimated costs, expected revenue, and cash flow projections.
• Director KYC: The director’s PAN, Aadhaar, and address proof. Lenders may also assess the director’s personal credit score when evaluating the application.
• Approvals and eligibility documents: A board resolution authorizing the borrowing under Section 179(3)(d), and DPIIT recognition when applying for schemes that require startup recognition.

Before applying, the OPC should also check that its applicable annual filings, including Form AOC-4 and MGT-7A, are up to date. Lenders may review MCA records, financial statements, and existing borrowing obligations when assessing the company’s application.

Which OPC Funding Option is Right for You?

The right funding option for an OPC depends on how much capital the business needs, how quickly it needs it, and how much control the founder wants to keep. The following matches common needs to the most suitable route:

• Small capital top-up: Owner contribution through a fresh share allotment, after increasing authorized capital in Form SH-7 if required.
• Short-term working capital: Director loans, which do not count as deposits when backed by a written declaration and disclosed in the Board’s report.
• Larger business expansion: Bank term loans, or collateral-free credit under CGTMSE or, for recognized startups, CGSS.
• Innovation or deep-tech projects: Grants under SISFS, NIDHI-PRAYAS, or iDEX, subject to eligibility.
• Equity from outside investors: Conversion into a Private Limited Company through Form INC-6, since an OPC cannot issue shares to investors.

Most OPCs can fund their growth through these routes without giving up ownership. Each route still comes with its own eligibility conditions and filings, and getting one wrong can delay the funds. RegisterKaro experts can help assess the right option for the business and complete the required filings, from SH-7 to INC-6.