In our last edition, we had discussed about the basics of funding (http://ca4you.in/blog/2016/04/19/funding-for-start-ups/)
In this article we will discuss about how to have great background for Debt Funding
1- Get Private Limited Company Incorporation Done. It is the most basic form of business registration which is accepted by Financial Institutes and is preferred over LLP Incorporation, One Person Company Registration and Firm Registration
2- Focus on correct Accounting and Book-Keeping principles and show the right profits (hiding profits to save some taxes does not pay in long run)
3- Have a robust Business Plan in place with focus on Revenue, DSCRA, expenses
4- Mostly for debt funding it is (almost) mandatory to have some kind of assets on your books. If this is not the case, the rate of interests may get high. In nutshell you would need some tangible asset as collateral (either Director’s or Company’s asset)
5- For Private Limited Company, it is always advisable to have some consultants who could help you to draft B-Plan, Investment Memorandum etc.
6- The rate of Interest in India ranges from 12% to 20% and the business plan should be robust enough to be able to generate serious profits to match these numbers
7- Apart from Banks, there are various NBFCs as well as Private lender who provides debt funding and thought they are a bit expensive but has quicker processing time.
Next article would cover details on Equity Funding, Hope this article was informative. For more info visit: www.ca4you.in
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