Chennai-headquartered Indian Bank has introduced an initiative for funding startups, 'IND Spring Board', in collaboration with the IIT-Madras Incubation Cell (IITMIC).
The bank's Managing Director and CEO Padmaja Chunduru said, "It is a known fact that banks find it difficult to fund start-ups as they do not meet the requirements under traditional models of financing. Business models involving high technology, lack of visibility of cash flows, high burn rate and high failure rate make the due diligence process for assessing viability difficult for banks. As a result, this segment has been almost completely funded by seed capital, or private equity from India/abroad."
Startups were depending more on equity and they had to share profit and ownership of the company to venture capital firms, private equity players or angel investors for mobilizing funds, she said.
However, in case of debt, the start-up just needs to pay interest and principal to the bank. Debt was missing in the startup ecosystem and entrepreneurs were missing this working capital finance and equipment finance, she said.
"This initiative, we believe, will be the spring board for start-ups to realise their ambitions. We see this collaboration as a perfect fit both for the bank and IITMIC," Chunduru added.
Established in 1907, Indian Bank is 113 year-old bank having made business of US$60 billion as on 31 March 2019. In April this year, Finance Minister Nirmala Sitharaman announced that Allahabad Bank would be merged with Indian bank. The proposed merger would create the seventh largest public sector bank in the country with assets of ₹8.08 lakh crore (US$110 billion).
Under the partnership, IITMIC will refer startups with proven technology and established cash flows to the bank and also extend advisory to the bank on the business model. The bank will offer an exclusive credit facility of up to Rs.50 crore for startups in order to fulfil their capital requirements and purchase of machinery and equipment.
The bank's Managing Director and CEO Padmaja Chunduru said, "It is a known fact that banks find it difficult to fund start-ups as they do not meet the requirements under traditional models of financing. Business models involving high technology, lack of visibility of cash flows, high burn rate and high failure rate make the due diligence process for assessing viability difficult for banks. As a result, this segment has been almost completely funded by seed capital, or private equity from India/abroad."
Startups were depending more on equity and they had to share profit and ownership of the company to venture capital firms, private equity players or angel investors for mobilizing funds, she said.
However, in case of debt, the start-up just needs to pay interest and principal to the bank. Debt was missing in the startup ecosystem and entrepreneurs were missing this working capital finance and equipment finance, she said.
Established in 1907, Indian Bank is 113 year-old bank having made business of US$60 billion as on 31 March 2019. In April this year, Finance Minister Nirmala Sitharaman announced that Allahabad Bank would be merged with Indian bank. The proposed merger would create the seventh largest public sector bank in the country with assets of ₹8.08 lakh crore (US$110 billion).
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