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Tough time for start-ups: Getting loans from Banks has become more difficult


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Indian start-ups are currently facing a tough time getting money to grow. It’s hard for them to get funds from different sources like angel investors, venture capitalists, and private equity. Even getting loans from banks and financial institutions has become more difficult. According to YNOS Venture Engine, a platform that analyzes this, debt funding in India has dropped by 65% in 2023 compared to the previous year.

  • In 2023, Indian start-ups altogether borrowed ₹22,194.79 crore until September 23.
  • But during the same time in 2022, they borrowed ₹63,513.7 crore.

Getting loans from banks is important for start-ups, with almost 7% relying on them. In comparison, less than 2% get funding from angels, 2.7% from venture capitalists, and fewer than 5% from government schemes.

Experts believe that the decrease in loans is because start-ups had a tough time last year, and they delayed their plans to grow. Also, there were fewer new start-ups created last year.

In India, 563 different financial institutions have given money to start-ups. HDFC Bank is leading, helping 3113 start-ups by December 22, 2023. The State Bank of India is next, supporting 1557 start-ups, but it gave the most money in loans at ₹39,518.2 crore, which is ₹15,162.105 crore more than HDFC Bank.

Thillai Rajan, a professor at IIT-Madras, says that banks are more willing to help start-ups now. He explains that it’s easier for start-up founders to get a loan from a bank than to get money from an angel or venture capitalist. The process is clear, and banks are accessible for founders from smaller cities and towns.

Nived Priyadarshan, who started Xplor, a Mobility as a Service platform, says that his team is looking to get a loan. He sees that venture capitalists and angels are not eager to invest right now. His platform already got some initial funds, and they plan to get a loan in the next round, preferably from a bank. He mentions that when you get a loan, the lender doesn’t interfere much with your business decisions, as long as you pay back the money as agreed.

However, not all start-up founders want loans. Bala Sundaresan, co-founder of Nullpointer, a start-up in Bengaluru, says that at the early stage when they’re not making much money, loans are not very attractive. Right now, they are not thinking about getting a loan. He prefers getting money through equity funding, which is easier in the early stages.

Surprisingly, Delhi NCR has the most start-ups that got money through loans – 2173. Mumbai is next with 1238 start-ups, and Bengaluru is third with 1182 start-ups, even though it has the most start-ups getting money from venture capitalists and angels.

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