Lending to startups

The topic of lending to small and medium-sized businesses (and start-ups often belong specifically to this “weight category” of a loan) is interesting to many banks, but in this direction, both in the West and in the East , there are a number of problems in Russia that impede the broad development of loans for startups, and also good reasons, often stopping factors for approving a loan to potential or existing projects. These are the reasons for our today's post.



1. Reckless decision



Often, the decision to create a project from scratch comes to a person or a group of like-minded people on a sudden, acute, often rash, desire or advice of friends to "do the same as they do." Therefore, when confronted with the first serious problems, the impetus to the development of the project begins to disappear, and the bank, which has decided to credit this project at its own risk, receives another potential non-return.



2. Unclear business plan

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Often, the parameters appearing in a business plan for a startup are “opaque” or simply incomprehensible to those responsible for making a positive decision. The format of the provided business plan is also important - often tables with specific figures and a logically constructed diagram of a future business project from its inception to the era of stable profitability are replaced with vague presentations or text arrays, the numbers in which are not supported by market realities.



3. Overcredit



A significant reason for refusal of a loan may also be the presence of an outstanding loan taken to develop your project in another bank. In this case, the bank understands that the startup has already violated the initial business forecast, approved by another financial organization, and does not seek to take risks.



4. Echo of crisis



In the pre-crisis times, some banks did not thoroughly analyze the effectiveness of start-ups and similar projects starting with zero investment and not guaranteeing income in the future. Therefore, at the moment, most banks are wary of such projects and carefully analyze the official income of project participants at the time of application, which, by the way, is a prerequisite in the West for issuing a loan to a business from scratch.



5. Lack of scoring algorithm



Unlike credit cards and mortgages, where the decision-making algorithm of a bank for issuing a loan to each individual is often determined based on the generated algorithm and risk factors for it, and based on them the bank makes a positive decision to calculate the risks associated with issuing loans to startups Similar mechanisms, alas, does not exist.



6. The inability to develop cross-services



Perhaps this item is not the highest priority and often does not lie on the surface for the average person. The Bank considers the business of the future borrower for the future, in the context of a possible future promotion of its own services. A good example. Choosing between two projects, one of which involves the opening of a small Italian restaurant, and the other - the monetization of his own social network, which is only gaining momentum, the banks are more likely to choose the first. And not only because of the clarity and availability of the mechanism of work. In the future, the bank can rely on loyalty from the owner of the restaurant in the form of installing an ATM on the premises, placing a stand with advertising services or acquiring services. In the case of IT-projects it is difficult to imagine such prospects.

Summarizing, it can be argued that the standard way out in the absence of the possibility of obtaining a loan in any financial organization for people seeking to implement their project with prospective stable monetization is participation in thematic forums (for example, in large-scale - RIF or RIW), exhibitions and seminars or contact the Small and Medium-Sized Business Support Fund, which can provide the bank with its guarantees of the success of your project, which is a good reason for it to issue a loan to your organization ui

Total: Before deciding to create a startup, you need to believe in your idea as much as possible, carefully select like-minded people and at least carefully draw up a business plan consisting of “transparent” and clear sets of letters and numbers, while carefully following all the recommendations from side of the credit organization. Remember - the main thing: "transparency" and a clear understanding of the planned actions.





Good luck and lots of successful projects!