bank finance to entrepreneurs

8/13/2019 Bank Finance to Entrepreneurs

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BANK FINANCETOENTREPRENEURS

Saurabh Kanathia

UBS MBA IB

2012-141Bank Finance to Enterpreneurs


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Bank Finance to Enterpreneurs

Venture capital

Long term equity finance

Investing as opposed to banks who lend

Looking for high gains

Accepting high risks

Can be involved in management of the

invested firm

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Structure of VCs

Mostly funds

Charge about 2% + success fee

Also some companies have partnership

with the new startups

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VC : Advantages

No fixed expense of debt servicing

Financial flexibility

Sharing of risk Value added investing

Attracting talent

Networking with service providers/suppliersAccessing markets

Enhanced credibility with lenders

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VC : Disadvantages

Dilution of shareholding

Increased 3rdparty governance

Increased controls

Increased commitment to stated strategy

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Types of VC

Early stage financing

Seed capital or pre-start up or R&D

Start up financing Second round financing

Later stage financing

Expansion Replacement

Turnaround

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Valuation excersise

1. Get rid of scamsters

2. Hygiene factors beware of things that

can shut down a business3. Growth & industry considerations

4. Due diligence

1. Physical evaluation2. Calling in the expert.

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Agreement particulars

Amount and terms of investment.

Dividend policy.

Composition of the board of directors. Reporting - management reports, monthly

accounts, annual budgets.

Liquidity (exit) plans.

Rights of sale Warranties.

Matters requiring venture capitalist approval

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Problems

Locating players

Concerns regarding exchange of info

Larger companies look equally attractive

with lesser risk

Even listed securities are giving great

returns

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India centric problems

Indian VC not yet a popular asset class

among institutional investors

Exit challenges Shallow markets

Little M & A activity

Brand India, not strong beyond services

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Some VCs in India

Jumpstartup investing

Draper Fisher sector specific

Charles River Ventures

Sequoia Capital

Westbridge too big?

ChrysCapital certainly too big

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Others

Banks ICICI

UTI

SIDBI

Canara bank

Corporates Intel

Motorola

Nokia

cisco

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Lending strategy of banks

Business plan

Financial statement

Profile of promoter

Asset base

Gross

Net

Credit scoring

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How Banks cover risks

Collateral

Internal incl. a/c receivable

External

Personal guarantees

Debt covenants

Short maturity debt

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Managing banks

Complete paperwork in time

Submit financial statements as scheduled

Route all transactions through bank

Ask for extras free drafts, alerts, etc

Exude confidence and well being

Transmit good news

Be proactive about inspections

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SMERA

Specifically for SMEs

Joint initiative of:

SIDBI

D & B

CIBIL

Other banks

Office currently only in Mumbai

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Rating process

SME contacts SMERA

Questionnaire is filled

Documents are submitted

Site visit by SMERA representative

Rating is announced 15 days after all

documents are received

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Thank You