Do commercial banks willingly provide investment loans to finance the establishment and development of an innovative startup in your country?
Do more often innovative startups use other external sources of financing for development, ie other sources of financing investment activities outside the banking sector?
Are these investment funds, government subsidies, business angels or other sources of external financing?
Please reply
Best wishes
We need to understand the perspective of the stakeholders involved in entrepreneurial ecosystem to understand how they finance start-ups:
1. Banks - dont believe in high risk and high return model - they need consistent return with a strong credit history. Banks will only fund to companies with atleast 3years of existence, audited financial accounts, networth more than the expected funding requirement, atleast 2-3partners with strong history, primary conventional products and services,etc..... so no start-ups qualify!
2. VCs or PE - provide equity funding (sometime debt) to already established start-ups with atleast 2-3 rounds of fund raising and string market traction
3. Angel/Seed - provide small sized equity funding to kickstart start-up ideas, but require some MVP, possible traction and foreseeable trajectory alongwith strong background of founders/co-founders
4. Family and Friends - as always these are the guys who fund and risk everything to get the the founder materialize their passion. Now p2p lending based marketplaces have started providing both equity and debt options to start-ups
5. Government/MLB grants - difficult to get, small in size and majorily focused at social impact start-ups.
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