I have come across many write-ups on how simple it is these days to raise capital from banks for a small business. I approached several banks for a waste-recycling business I want to start, but I found that they were unwilling to fund first-generation businesses. What can I do?
Tina Paul, Kolkata
You are right; banks are generally reluctant to put long-term capital in a new business, though some enterprising banks may be willing to fund a ‘micro’ business that does not need much. Banks, however, willingly finance working capital. Ultimately, the amount of loan you get depends on how comfortable the bank is with the risks that your business is exposed to. Ask yourself: if you were the bank, would you be willing to take on the risk? It’s a good idea to get started with your own funds, borrowing from friends and relatives, and alongside take short-term loans from the bank to tide over cash flow problems. The short-term loan you will get against your current assets. If you plan to export your recycled product, try getting export credit on your goods—it’s easier. Once you have established a relationship and a credit record with the bank, you may at a later stage, be able to convince the bank to lend you more for longer periods and at better rates.
