Some are run by experienced old men with strong financial backing, while others are managed by youth with very low financial support.[break]
Kathmandu’s corporate sector is growing, whether it is with the help of startup businesses run by youth or by strong multinational businesses.
It all boils down to finance and sponsorship. In this scenario, it wouldn’t be wrong to say that the youth-run businesses of Kathmandu are facing various problems collecting money and getting their businesses started up.
The youth of Nepal are well empowered and have dabbled in the complex world of businesses from a very young age.
Ambitious and highly motivated, these young businessmen usually face the maximum trouble while trying to collect the initial capital to bring the business to life.
In most cases, this startup capital is collected personally by the businessmen by selling parental assets or by working on a partnership with a friend with money.
Opting for a bank’s corporate loan seems to be out of the question for these young entrepreneurs.
“It’s ingrained in the Nepali society and in us to fear loans. We were brought up with the general concept of people drowning in loans and people having to liquidate their assets to repay their loans,” says 28 year old Prabal Raj Adhikari, Director at Nepal Mount Window, Hattisar.
“But looking at the loans provided by banks in Kathmandu, loans aren’t very favorable to young businessmen. The interest rates are too high and the procedures too complicated, and there is also the ingrained fear of somehow not being able to repay the loan,” he adds.
Different banks have their own policies regarding corporate loans. But the youth aren’t discriminated against as anyone with his Nepali citizenship proof can file for a corporate loan.
Policies, however, aren’t exactly youth friendly. Even though all of these banks have their own policies, applying for a good corporate loan requires the business to have run for at least two years.
Various kinds of documentation need to be maintained and the business needs to be making a profit to be considered for a loan.
“The loans provided by Nepali banks aren’t really favorable to young entrepreneurs primarily because of security. The loaning bank needs some kind of assurance and the bank needs to make sure that investing in a business will not result in a loss,” says Partiva Dangol (name changed as per request), manager of a corporate bank that she did not want named.
Another aspect of loans policies that seems to scare young entrepreneurs are the collateral. Young entrepreneurs usually don’t have any assets of their own and offering parental assets as collateral would be risky for these entrepreneurs in the event of business failure.
“People who have assets to offer as collateral can usually finance themselves and people who are in need of loans usually don’t have assets to offer. Even for small amounts of loans, banks require collateral and documentation. I think this is the main reason why bank loans aren’t very favorable to young businessmen,” Partiva adds.
“It depends on the class of the people. Entrepreneurs from high class families with prior business knowledge have sufficient knowledge about loans and have enough assets to provide as collateral. But the people who come from the middle class or lower class have a very difficult time with bank loans. First of all, they don’t have enough awareness of these loans, and secondly, they don’t usually want to offer their assets as collateral,” says an official at Nepal Investment Bank.
Another reason why young people don’t opt for loans could be the fact that they still have learning to do and colleges to attend.
These young businessmen usually start small businesses for experience and usually tend to go overseas for further studies.
This poses a problem for these businessmen as well as banks. Banks bind these young businessmen to their businesses until the loans are fully paid. So this restricts young energetic businessmen from furthering his education. And education always comes first.
“It’s not that young businessmen shy away from corporate loans. It’s just that banks make it very difficult for them to file for loans. Banks work on collateral and many young businessmen don’t have any collateral to offer.
In other countries, banks can even take good business models as collateral or share in the business. But Nepal’s banks only work with land, houses and cars that many young businessmen can’t offer,” says Saurav Dhakal, 31, Director of Research and Development at Nepal Infopark, a web and social media corporation.
“The interest rates are very high as well. 14-15% interest can be quite a lot for businesses starting up. These businesses need some time to make a mark before they actually start making profits,” he adds.
With the blooming business industry in Nepal, a lot of financial difficulties are being faced by young entrepreneurs. But the difficult situation that these banks pose for young businesses makes it almost impossible for young businessmen to opt for loans.
Young businessmen need more support to help the corporate industry grow and this is where banks come into play and this is where change in loan policies is the need of the times.
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