'Young Turks need to find alternate ways for finance'

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Saurabh Gupta | 26 Nov, 2009
To start a small business, young entrepreneurs always find that adequate finance at reasonable interest rates is a big challenge, but they must understand that there are other alternatives for their financial requirements, says experts at a MSME conclave organized by Economic Times in the national capital recently.

Avnish Garg, after completing his engineering degree from UK and MBA from India wants to start a small publication house of educational books, have questions about money in his mind. "How I can collect money? Whether some financial institution can help me or I have to look towards my parents? Where I can find funds to start a small business," Avinish asked SME Times on the sidelines of the event.

Everybody knows that the Micro, Small and Medium Enterprises (MSMEs) are the engine of nation's economic growth and the government have various policies to support MSMEs, but the question about money are on every young entrepreneur's mind. Managing money involves everything from raising capital to setting salaries, from invoicing and collections to monitoring cash flow. Various veterans and also young entrepreneurs have expressed their views during the conference.

CEO & Founder of QAI India, Navyug Mohnot said, "A entrepreneur must understand that there are various alternates to finance their ventures, what you need is how you present your business before the financier. People will invest in you not in your business plan. In the beginning it is not about the money, it is you that how you innovate your business."

There is consensus now that much of the economic growth in the world (since 1990s) was the result of excess liquidity, which was available due to lax regulations and massive use of new financial instruments like venture capital, derivatives, credit SWAPS, CDOs, etc.

Mohnot said that one should be very careful about venture capital. "To choose a venture capitalist is very critical. It is similar to choosing your life partner," he added.

The CMD of Tulip Telecom Ltd, Lt Col H. S. Bedi, said, "The beauty of finance is when you want money nobody will be ready to give you and when you don't want, everybody is ready to give you money. And so not getting a right banker, can totally ruin an entrepreneur's business plan."

He said, "Innovation is the key to business growth. The moment you innovate your business that will be the turning point of your business." He also expressed the problem of innovation. He said, "But the problem is that, innovation has very short-term life. In the moment you innovate everyone will start copying you. So you have to keep innovating continuously to survive."

Obstacle is the point of opportunity. If young entrepreneurs have innovative ideas and true value, then talk to your customer and they will believe you, says Vijay Shekhar Sharma, MD, One97 Communications.

Another young entrepreneur Ritesh Agnani, from Gurgaon, who wants to start a small chemical factory in Orissa, has similar queries about money in his mind. Ritesh said, "If I don't have collateral or security money to show, then how how can I raise money from the bank?"

On the issue of collateral free credit, MD of IFCI Factors, Rakesh Kapoor said, "For MSMEs many schemes are there, but delivery is the problem. First generation entrepreneurs probably have nothing to offer. So the best thing is they can capture the costs of the project."

"Cost of capital is the one thing, which destroys or sustains your project. If the cost of project is high then that there will definitely be increase in the cost of final product. So the cost of project needs to be kept reasonable. Second thing, you should be very particular while adopting a new technology. A technology should be affordable, profitable, and changeable."

Those who wish to succeed in a time of rapid growth and transformation, must judge wisely which practice to continue and which new practice to adopt. In many businesses, a single innovation can provide the spark and the fuel that launched them from start-ups to success and from success to global recognition.