Three years ago, I met another venture investor in Jakarta to talk about startups in emerging markets. We spoke about various sectors and business models. “But when these companies talk about monetization, they’re all lending companies,” he remarked. He was right. The roadmap and monetization slides in a lot of startup decks, even if they aren’t strictly lending fintechs, talked about some form of lending.
It seems that startups are arriving at the same conclusion that GM and other American car manufacturers famously did in the 1930s: there’s more money to be made in financing cars than in selling them outright.
Got data on inventory levels and flows for your customers? Let’s bundle inventory financing. Transporters with working capital challenges to finance fuel costs? Try working capital financing.
Bundling lending products to facilitate consumer spend is common in most industries, and tech is no exception. After all, no business would turn down an opportunity to get a larger portion of the customer’s wallet and create loyalty.
But tech companies are financed through equity, and raising equity is an expensive way to finance lending. That’s because most venture capital investors expect explosive growth and returns – not the sort that can be achieved by lending at any reasonable rate. So, as startups scale and expand into financing products, they’ll need to access debt to keep making loans themselves.
What kinds of debt for startups exist? These are the categories:
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Read Full Story: https://profit.pakistantoday.com.pk/2022/04/27/startups-should-be-looking-at-debt-not-just-vc-funding/
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