When Queen Isabella I and King Ferdinand II funded Columbus's expedition, the intent was to find a sea route to Asia, as such a route would be a vast improvement to the dangerous land route which was used by European merchants at the time. Columbus was a man of his time, and not a terribly well-informed one at that; his distance estimates for the route underestimated the true distance by quite a bit. The accurate measurements of the Earth's circumference made by Greek mathematician and geographer Eratosthenes a millennium and a half prior were commonly known to the educated gentry, and the committee Isabella referred Columbus's plans to were well-aware of it when they expressed their incredulity at the estimates.
Still, Ferdinand and Isabella didn't want Columbus to turn to other patrons; they believed there could still be value in the expedition, even if the rumored sea route to Asia turned out to be fiction.