Challenges faced by New & Existing Entrepreneurs in Raising Credit in India

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Information about Challenges faced by New & Existing Entrepreneurs in Raising Credit in India
Business & Mgmt

Published on February 22, 2014

Author: SiddhantBhatia



This presentation depicts various challenges faced by new and existing entrepreneurs in India in order to start their venture and sustain them in terms of getting the right paper work to raising actual funds from commercial and government financial institutions. Certain solutions are also pointed out in order to overcome such hindrances.



Current Scenario Sources of Startup phase funding 9, 9% 3, 3% 3, 3% 22, 22% 63, 63% State Finance Corporation Angel Investor Venture Capitalist Banks Self Financed Source: National Knowledge Commission No. of proposals approved – Decreasing Amount of funds dispersed – Increasing Implications • Stringent process • Govt. schemes not getting utilised • Rise of private equity – VCs

Difficulty levels faced by types of entrepreneurs in securing bank credit Source: National Knowledge Commission

Challenges faced by New Entrepreneurs • Proper Preliminary docs • Much emphasis on individuals/ team profile • Time duration of credit acquisition • Under financing – demand supply gap • Collateral undervaluation • Skillset, resources and infrastructure overvalued • Improper communication from the banks • Unavailability of seed capital • Gender bias-ness

Challenges faced by Existing Entrepreneurs • Re-work on the papers prepared prior to loan application • Previous financial records • Past repayment schedule • Debt restructuring • Under-finance

Solutions for New Entrepreneurs • Bankers require return on time invested – proper compliance regarding docs before approaching a bank. • Availing of micro finance, micro equity. Schemes like Mutual Credit Guarantee & Network Enterprises Fund • Approaching Angel Investors, VCs, PE Funds. • Set up a public fund using innovative PPP mechanisms • Make incubators responsive to market needs • Encourage enabling business environment

Solutions for Existing Entrepreneurs • Selection of bank according to the nature of business • Create a secondary market for smaller companies • Inclusion of more private sector banks in case of debt restructuring • Providing credit in clusters should become more mainstream • Bankruptcy laws • PPP establishments for existing firms

Wishing you all the best in Securing a Hassle-free Loan! Thank You!

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