For many young people, money remains a challenge in their endeavor to become entrepreneurs. So what do you do when you're stuck on how to finance your business? If you have no savings and no means to organize financial backing, you will most probably have to put your idea on hold till something comes along.But if your business has the right structure, you might catch the eye of venture capitalists like Kushal Vaidya who is involved with five startups. Vaidya has invested in two software companies, a merchandising brand, a farming business, and a pub/club establishment and is always in search of innovative ideas.
Explaining his requirements, he says, "There are four key things I look for in a business- perceived value/value proposition, scalability, exceptional team, and sustainability. An innovative startup with a great revenue model and value proposition always catches my eye. However, I'm more interested in technology due to its scalable nature."
An investor has to know exactly what he is investing in before plunging in too deep. He elaborates, "It can be an idea, a product or even a team. I usually try to research on all the externalities and stakeholders concerned with the business model before I make any investment. However, there are risks and rewards in any business and I believe that having a diversified investment portfolio can balance things out in such cases. I get myself a reasonable equity in all the businesses I believe and invest in."
Young entrepreneurs can also approach the Youth and Small Entrepreneur Self Employment Fund (YSEF) being monitored by the Ministry of Finance. According to the criteria set by the ministry, an unemployed person between 18 to 50 years of age can apply for a loan by 'contacting a bank, financial institute or cooperative that has reached an agreement with YSEF.'
An applicant can get a maximum loan of Rs 200,000, without any collateral, at an annual interest rate of 6-7%.
Banks have their own provisions for lending money to startups and Small and Medium Enterprises (SMEs).
Mega Bank, which is the first bank to establish micro-finance (direct lending) scheme to SMEs, offers a maximum collateral free loan of Rs 60,000 and a collateralized loan up to Rs 1 million.
Raveena Desraj Shrestha, Chief Business Officer (CBO) of Mega Bank, states that the micro finance scheme is targeted at rural and semi-urban areas.
"In rural areas, we form groups and we appoint a senior person to handle everything. Ninety nine percent of our borrowers are women. Our interest rates are very competitive. Actually they're much lower than what they were used to dealing with the local money lenders. And the payback has been exceptional in the last four years. It's safe to say that our nonpayment ratio is absolutely negligible," she says.
Entrepreneurs, who want to start their SME like fish farms, beauty parlors, etc, can make the most of such schemes in banks.
Govinda Gurung, Senior Executive Officer at Civil Bank, says that the bank's lending scheme starts from Rs 5,000 and goes up to Rs 750 million. "Most young entrepreneurs ask for loans of Rs 500,000 to one million," he says.
Supporting the financial needs of SMEs is Dolma Impact Fund established with support from the UK Department for International Development (DFID).
The Fund's Shabda Gyawali explains that while they're focusing on middle stage companies at the moment, they're open to the idea of investing in startups, too. Currently the Fund is available to middle stage companies who have an annual turnover of Rs 35-50 million.
"We don't ask for collateral. We invest in teams. But we do take a share in the profits or loss that the company bears. We're sector agnostic as far as being interested in a particular category goes. But we see business opportunities in small scale renewable energy, tourism, healthcare, education and agriculture," he says.
Related story
Govt committed to solving problems seen in economy: PM
-1779842101.webp)
