Marketing and Finance !

[supreeth.hegde5]

Hey we should start finding details on what basis a bank gives loan to a start up. And what surety it needs to give a loan .
@ Technical  and Plant set up team - give us a brief estimation of your financial requirement for the plant set up.

[Supreet Hegde]

The Long-Term Finance may be Raised by the Companies from the
following Sources :-

1) Capital Market :
In capital market companies raise funds by issuing shares and
debentures of different types. The government controls the issue of
shares and debentures under the capital issue (control) act , 1947.

2) Special Financial Institutions :
A large number of financial institutions have been established in
India for providing long-term financial assistance to industrial
enterprises. There are many all-India institutions like Industrial
Finance Corporation of India (IFCI); Industrial Credit and Investment
Corporation of India (ICICI); Industrial Development Bank of
India(IDBI) , etc.These national and state level institutions are
known as 'Development Banks'. Besides the development banks, there are
several other institutions called as 'Investment Companies' or
'Investment Trusts' which subscribe to the shares and debentures
offered to the public by companies. These include the Life Insurance
Corporation of India (LIC); General Insurance Corporation of India
(GIC); Unit Trust of India (UTI) , etc.

3) Leasing Companies :

Manufacturing companies can secure long-term funds from leasing
companies. For this purpose a lease agreement is made whereby plant,
machinery and fixed assets may be purchased by the leasing company and
allowed to be used by the manufacturing concern for a specified period
on payment of an annual rental. At the end of the period the
manufacturing company may have the option of purchasing the asset at a
reduced price. The lease rent includes an element of interest besides
expenses and profits of the leasing company.

4) Foreign Sources :

# Foreign Collaborators
# International Financial Institutions :- like World Bank and
International Finance Corporation (IFC) provide long-term funds for
the industrial development all over the world.
# Non-Resident Indians : Permitted to buy shares and debentures.

5) Retained Profits or Reinvestment of Profits :

An important source of long-term finance for ongoing profitable
companies is the amount of profit which is accumulated as general
reserve from year to year. To the extent profits are not distributed
as dividend to the shareholders, the retained amount can be reinvested
for expansion or diversification of business activities. Retained
profit is an internal source of finance. Hence it does not involve any
cost of floatation which has to be incurred to raise finance from
external sources.

Short-Term Finance may be Raised by the Companies from the following Sources :-

1) Trade Credit
2) Installment Credit ( Plant set up team - search for the companies
which might give us this credit )
3) Accounts Receivable Financing
4) Customer Advance
5) Bank Credit :
# Loans
# Cash credit
# Overdrafts
# Discounting of bills

> --
>
>

[Akshit Salecha]

I think the most safest and sure way of financing will be JV, this will clear our doubts about the product because we will make what the other company wants e.g. Bottles for Coca-Cola.

--

--
Regards,


Akshit Salecha,
Department of Biotechnology,
IIT Madras.

[Supreet Hegde]

That suits only if you are selling your product to a single company.

> --
>
>

[Akshit Salecha]

Yes. That's should be our goal initially. We can always diversify later on.

--

[Supreet Hegde]

Even in Jv , both the parties have to contribute equally. So we have
to get half of our finance from some other sources. And in Jv we are
meant to be bound with laws with other party , so we cannot modify our
productions and market whenever we wish to. We will lose our freedom.

> --
>
>

[Akshit Salecha]

There are many JVs where a sole partner invests. But, yes initial financing will be important which we can get through bank loans.

--

[Supreet Hegde]

Bank loans are 50 lakh max. And what about the laws in Jv? Are they
flexible enough to allow us change our product and market at any time
we wish to?

> --
>
>

[Shalin Doshi]

I think it is contractual ^. We can change after the stipulated duration.

--

--

Shalin Doshi

BT11B064

Second Year Undergraduate Student

Department of Biotechnology,

Indian Institute of Technology Madras, Chennai

Ph. - 9962292640

[Akshit Salecha]

We can get much more than 50 lakhs. Basically we need land for that we get loans wherein all the documents of the land will be with the bank and we will get it after we repay. After having the land we will get separate loans for plants, machinery and working capital.

Also, since we are not forming a JV in real life its impossible to speculate on the rules. Since its a ppt what we mention is in our hands and we don't need to reveal all this.

--

[Supreet Hegde]

What are the benefits of Jv over Development Banks and Investment trusts?

> --
>
>

[Akshit Salecha]

Secured business. Initial support through capital, expertise. Steady flow of income. Ever growing demand.

--

[Supreet Hegde]

They give max 50 lakh without any security ( land, gold etc ) . If you
keep land for surety , you will get more loan, but my point is how
will you get that land?

On Thu, Nov 8, 2012 at 11:27 PM, Supreet Hegde

[Akshit Salecha]

They give loan to buy land and they keep the documents of the land. Basically they give 80% of loan for the land against the land itself. So we need to pay the remaining 20%. And as we repay the loan the land will be in our name.

--

[Supreet Hegde]

So you say that , excluding the land cost they give us more than 50 lakh?

> --
>
>

[Srihita Rudraraju]

i think jv is good for initial stages....secured business as akshit said..but can you come ut of it later...what are the rules regarding that??

--