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Raising Funds From Banks When Starting Up

Image for representation. (Reuters)

Image for representation. (Reuters)

Loans are provided by banks against assets of the business or individual and for which bank usually mortgages land or a residential home of an individual.

Startup-Ecosystem has become an integral part of our economy and every day new startups and new business ventures are forming and contributing to the Indian economy.

However, businesses have become more dynamic as compared to the traditional business ventures. A businessman faces heaps of issues while starting up a new venture, be it a self-employed person or a serial entrepreneur who has been into ventures before. However, the main concern has always been the startup capital since gone are the days where people used to start a business venture with their savings in the form of liquid money i.e. cash or getting help from parents.

Banking sector plays a pivotal role since every business needs some kind of initial funding and startup capital is generally provided by banks. Loans are provided by banks against assets of the business or individual and for which bank usually mortgages land or a residential home of an individual. Loans which are provided against property are secured loans since it is granted against a property so interest rates are cheaper ranging between 11-16% but are provided only for 40-60% of market value of the business. The remaining fund has to be invested by businessman be it from his savings or borrowed loans from his family, friends and relatives.

Another point to be taken care of while getting a loan is commercial viability of business plan since banks are unwilling to provide loans if they don't find the venture to be fruitful. Also, an individual has to have the early finances to be sorted before applying for a loan in order to have access to the permission by local authorities. Fire norms, occupational safety and health norms have to be mentioned in the business plan and all needs to be accounted for beforehand.

Personal loans are accounted for by the banks before granting any loan in order to ensure safety and return of their money for which a businessman needs to have his accounts clean with a good flow of money. Credit worthiness plays an integral role.

first published:September 08, 2017, 23:17 IST
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