Business of Cleantech ( Raising Debt)
One of the biggest lessons I learnt in life is that Debt is bad. In our personal lives we deal with Home Loans, Car Loans, Personal Loans and Credit Cards and realise that there is good debt and Bad debt. Our parents generation built houses once in their lives and rarely bought cars as debt financing was rarely available till the mid 90’s. However businesses have always had access to debt from working capital finance, Term loans I remember my father spending a lot of time with the branch manager of the bank, almost as much time as with his customers. Cleantech Startups need to raise a lot of capital all the time and I will explain some of the options that startups have to raise Debt and Other forms of capital.
Startups in India have generally avoided debt, frankly not much is available anyways. However these days a few different categories of debt has become available to startups through Banks and NBFC’s. In fact the NBFC sector has been in the forefront of providing a lot of growth capital and with prudent use of startups who are starting off could scale without the need for raising large amount of venture capital
1. CGTMSE Scheme – Startups, especially clean tech startups should necessarily get their MSME registration done. The CGTMSE scheme provides loans upto 2 crores as debt with or without collateral. The details of the schemes are available on the website and and I am sharing the link below
2. Technology Development Board – Startups especially in the manufacturing domain can get a softloan of upto 50% of the project cost. The same is provided in the form of project financing. For more details I am sharing the link below. Startups are encouraged to apply for the same as the terms are very favourable
3. Bill Discounting / Factoring – The concept is nothing new and has been in existence for decades but lots of NBFC’s provide easy credit against Invoices especially of Blue Chip Clients. Most Cleantech Startups will end up having Large Corporates as their initial clients. This is one of the easiest ways to ensure liquidity for startups
4. Venture Debt – An entire asset Class has opened up with Venture Funds who specialize in Debt. Its by no means cheap but then debt is a lot less onerous than traditional equity funds.
5. Banks – Finally as you start getting revenues and your first Tax Audit and Balance sheet is finalized, keep talking to your bankers. They might offer a Cash credit and Overdraft limit which would keep your liquidity running
In the end there used to be a saying “ Debt is the Cheapest form of Capital “, however please look at what works for you. Work with an experienced Financial Hand to handle your companies finances and remember “ Cash in any form is king”