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Indian Bank offers loans without collateral for startups

Chennai: State-owned Indian Bank on Tuesday launched an exclusive collateral less loan scheme for startups — Ind Spring Board — of up to Rs 50 crore at a minimum cost of 9.85% and maximum of 12.3% with a repayment period of up to 10 years.
Under this loan scheme, startups’ share of capital (i.e margin) is allowed at a minimum of zero and goes up to 25%. This move comes a month after the Reserve Bank of India (RBI) said loans of up to Rs 50 crore towards startups would qualify for the priority sector, alongside renewable energy used for agriculture.
The bank has partnered with IIT Madras Incubation Cell (IITMIC), which would assist in screening and identifying well-qualified startups to avail funding under this scheme.
The loan amount disbursed for startups will be used to meet their operational expenditure (OPEX) and capital expenditure (CAPEX) which includes working capital, purchase of fixed assets and expenses incurred in filing for patent.
Credit guarantee fund trust for micro and small enterprises (CGTMSE) coverage will be provided for eligible micro and small scale enterprises (MSE) accounts.
“It is known that banks find it difficult to fund startups, as they do not meet the requirements under traditional models of financing. The business models involving high technology, the lack of visibility of cash flows, credit history, the high burn rate, the high failure rate among start-ups make the process of due diligence for assessing viability by banks difficult. Thus, we have stepped in to bridge this gap in funding for startups through this collaboration with IITMIC,” said MD& CEO Padmaja Chunduru.