Startup Loans

The topic of lending to small and medium-sized businesses (and startups often relate specifically to this “weight category” of a loan) is interesting for many banks, but this direction both in the West and in the East in Russia has a number of problems that hinder the widespread development of lending to startups, as well as good reasons, often being stop factors for approving a loan to potential or existing projects. These are the reasons our today's post is dedicated to.

1. A rash decision

Often the decision to create a project from scratch comes to a person or a group of like-minded people according to a sudden sharp, often rash, desire or advice from friends to "do just like them." Therefore, when faced with the first serious problems, the impetus for the development of the project begins to disappear, and the bank, which decides to lend to this project at its own peril and risk, receives another potential default.

2. Unclear business plan

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

3. Re-lending

A significant reason for refusing a loan may also be the presence of an outstanding loan taken for the development of 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 institution, and does not seek to take risks.

4. The echo of the crisis

In the pre-crisis times, some banks did not carefully analyze the effectiveness of startups and similar projects, starting with zero investment and not guaranteeing future income. 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, incidentally, in the West is a prerequisite 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 to give a loan to each individual person is often determined on the basis of the generated algorithm and risk factors for it, and on their basis the bank makes a positive decision to calculate the risks associated with issuing loans to startups , alas, such mechanisms do not exist.

6. The impossibility of developing cross-services

Perhaps this item is not the highest priority and often does not lie on the surface for the layman. The Bank considers the business of the future borrower for the future, in the context of the 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 their own developed and only gaining momentum social network, banks are more likely to choose the first. And not only because of the understandability and accessibility of the mechanism of work. In the future, the bank can count on loyalty from the owner of the restaurant in the form of installing an ATM on the premises, placing a counter 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 if there is no possibility of obtaining a loan in any financial institution for people seeking to implement their project with promising stable monetization is participation in thematic forums (for example, in large-scale ones - RIF or RIW), exhibitions and seminars or contacting the Fund for Support of Small and Medium Enterprises, 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 understandable sets of letters and numbers, while carefully following all recommendations from the credit organization. Remember - the main thing: "transparency" and a clear understanding of the planned actions.


Good luck and a lot of successful projects!