Sagar Bedmutha gets candid about how he landed a loan
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| Sagar Bedmutha Founder & CEO, Optinno Mobitech Pvt. Ltd |
Which bank did you take funding from?
Bank of Maharashtra, Pune
Why did you choose that particular bank?
I wanted the loan under CGTMSE scheme. It is the only scheme for collateral free loan. Apart from the pre-requisite of the scheme, private banks have their own criteria which a startup typically cannot qualify for (ex. Audited balance sheets or turnover above Rs 40 lakh, minimum thee years of establishment and so on).
Also, private banks have higher rates of interest, and their processing charges are higher. So I decided to go with a nationalized bank. Out of the three banks I shortlisted, BoM was most proactive and had a very friendly approach. Other banks were either too slow or un-informed about the scheme, and did not want to look at it.
How much funding did you ask for and get?
I needed funding to meet my operational expense for a few months. So I asked for small funding -
Rs 7.5 lakh and I got the entire amount. Under the CGTMSE scheme, one can get a loan upto
Rs 1 crore (of course based on the business plan and repayment assurances). The other reason for requesting a small funding was- reducing the initial EMI burden. I can now top-up the loan if I need more money, since I’ve developed a good relationship with the bank and my repayment record has been good. And I can show growth in my business because of funding.
What were the terms like?
I would say the terms were pretty standard ,just like any other loan. We submitted typical documents like MoA, AoA, business plan, resumes of the Directors, Address proofs, Incorporations certificate, bank statements for past one year, deals in progress, etc. The clearer and well-presented your documents, the lesser time it takes.
How much time did it take, from application to sanction?
About two months. A lot of time could have been saved, but even the bank officials were unaware of the scheme and the process.
Another important factor was that ours is a complete software (that too mobile software) business. I really had a tough time convincing the authorities that the business can be done the way I was imagining. Basically, the bank officials never had processed a loan for a software firm, and since this loan was collateral free, they were cautious in many aspects.
Some unexpected delays also happened. For example, they wanted the SME service registration certificate of our company, which we did not have. Procuring that took about 10 days extra. So to be on the safer side, the entrepreneur should consider a three month time frame.
What was your experience like—tedious/pleasant?
No loan experience can be pleasant, because of the long and tiring process. It was definitely tedious. But looking back, I can say it was all worth the value/ benefit I got from it.
Did you present a project report/business plan? Made by self or with professional help?
Yes. No bank would give loan for business without business plan. I had made it and also taken the help of a professional. The reason is, the typical b-plan an entrepreneur makes is quite different from the typical b-plan the bank professional would ‘like’ to see. Typically, an entrepreneur makes a plan that may appeal to VC- valuations, projections, etc. but the bank is more keen to see your P & L, projections based on past records, cash flow, etc. So getting the help of a CA or a professional is a good idea. Do remember, though, that getting your business plan done completely without your own involvement can expose your lack of business-financial understanding in front of the bank officials, as they see numerous plans each day.
Your advice to entrepreneurs applying for a bank loan?
There are plenty of good schemes available for entrepreneurs. Do take time to know more about them and understand how can you take their benefit. As I mentioned, any loan process is exhaustive and at many points frustrating. But it is the cheapest source of money you can get.
I would strongly recommend entrepreneurs to first go for bootstrap. Take a very small loan. This will help you get the loan easier and reduce the interest burden. Also, you get a good opportunity to develop a relationship with your bank and then get more money. Take a little more loan and then pitch for VC or angel funding. In this way, one can validate the venture, realize the value of money and also get better valuations at the time of VC funding.
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If you have questions for Sagar Bedmutha, write to us at dare@cybermedia.co.in
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