Some Ways Banks are Making the Life of a Start up Easy

The age-old riddle, “who came first — chicken or the egg?”, seems to have been replaced by, “will fintech exist without banks?”. And just like the chicken and egg’s existence, most experts now believe that both need the other to exist.

Entrepreneur India takes a look at the services that banks are offering to start-ups without partnering or acquiring them, to help them scale.

 Branches Only for Start-ups

Giving start-ups a preference and realizing their ever-growing financial needs, banks have opened up branches that deal specifically with start-ups. Both Ratnakar Bank Ltd (RBL) and SBI have gone ahead to launch these branches. State Bank of India’s branch for start-ups is called SBI Incube and was launched in Bengaluru. Following suit, RBL too opened a branch in the start-up city, saying that the branch would take care of all banking facilities needed by entrepreneurs.

APIs to Solve Problems

An interesting aspect of banks that has opened up avenues for start-ups is API or Application Program Interface. Giving way to open banking, the declaration of APIs allows third-party developers to come up with smart solutions for a bank’s problems. This is even referred to as one of the most crucial aspects of financial technology. It will give access to start-ups to the real-time data of a bank, giving the former power to innovate and solve a real-time issue. This will also let the third-party know more about a consumer’s history of transactions.

Online Advisory Platforms

With a bank’s expertise, most of the mentors for fintech start-ups come from banks, making it obvious for a bank to open up advisory services for entrepreneurs. From smart tools to the right alliances for mentors in technology and banking, these platforms also offer digital and cash management facilities. While HDFC bank has launched SmartUp, Yes Bank has launched YES Headstart programme that offers entrepreneurs assistance in registering and even incubation services.

The Next VC: Funding Start-ups

While the investor network is growing at a rapid speed in India, banks too are joining the herd. And with a bank’s vested interests in the financial technology space, the institutions don’t just invest money into start-ups but also give them access to the bank’s customer base.

SBI has earmarked a Rs 200-crore fund for start-ups. SBI’s CEO Arundhati Bhattacharya has also been reported to say that the bank would offer financial and legal assistance to the start-ups under its hood.

Meanwhile Kotak Mahindra Bank’s Kotak Business Boosters helps entrepreneurs in gaining access to funds right from the seed stage to series B.

With the presence of many alternative lending platforms that cater to small and medium business or start-ups, banks too are making the financial world easier by doing away with the rigid structures one needs to go through to get a loan. From loans to run your everyday business to long term loans, most banks these days offer loans specifically for start-ups.

Hassle-free Account Opening

When you are a start-up, there are just too many documentations, financial and management issues to take care of. All of this, apart from the main vision of the start-up that they set out to do — solving a problem that exists in our day to day life. So, making it one step easier for start-ups, banks offer them an easy and hassle-free process to open accounts. ICICI Bank even has an option called Shubhaarambh current account aimed at entrepreneurs that lets them have zero balance for the first six months.

Payment Gateway Partners

With the boom of payment gateways or digital wallets or the increased involvement of the fintech aspect in each start-up, which requires a transaction, banks come in handy for most start-ups by offering payment gateway services. Even Axis Bank offers the service for a smooth cash flow under its business banking solutions scheme

Money Mistakes That Could Have You Losing Thousands of Dollars Overnight

Too often, young entrepreneurs make egregious mistakes that end up costing their business thousands of dollars. This is especially true when they’re focused on generating more leads and driving new business, a situation in which many tend to ignore their expenses and end up accruing a scary amount of debt. The average entrepreneur can be a bit cavalier with their financials: it’s easy to rack up thousands in “necessary” expenses without considering whether or not those bills are actually helping grow your business.

When it comes to filing taxes, you should be especially careful with your numbers. Unfortunately, you can lose thousands of dollars overnight when you fail to prepare for tax time.

 If you’re thinking this can’t happen to you, then consider the ways in which you can go wrong with your taxes: you can underpay, which can lead to expensive IRS interest and even penalties, or you can neglect to take all the relevant deductions, meaning you’re paying more in taxes than you really owe.

If you’re looking to avoid such money management mistakes, then read on: this is how you need to handle your finances.

1. Know your five largest expenses by heart.

Start by answering a simple question: what are the top five things you spend the most money on each month? Then, think about how you can either reduce or eliminate superfluous costs.

For example, do you really need the Expert plan of that email marketing service, or can you afford to downgrade to a more basic plan (or get rid of it altogether if you’re not utilizing it)? Or, if you’re renting an office space, consider whether or not you’d be just as efficient working from your home office.

Take a good hard look at your biggest expenses. If you’re being critical (as you should be!), then you’ll find that you’re likely spending more than you need to.

2. Make sure each dollar spent is tied to a dollar earned.

Once you review your five largest expenses, it’s time to strategize. Going forward, you should think of each new expense as a strategic investment. How will each new expense help to grow your business? How will this expense bring in more revenue?

Ultimately, this should be your goal: for every $1 in business expenses you incur, your revenue should simultaneously increase by $1 (or more). If you can train your brain to get into this habit of thinking, then your business expenses will start to pay for themselves.

Susie Moore, life coach and bestselling author of What If It Does Work Out, has this advice for entrepreneurs getting their first business off the ground: “Sell first, build later. Focus on making money before spending money. Get customers and clients to buy into your concept, then you can give them what they actually want.”

We also reached out to best-selling author and private consultant Jeremiah Desmarais, who shared his insights on financial mistakes clients have made before coming to him for help.

What Desmarais found are three common errors new entrepreneurs make when trying to get their business off the ground that comprise what he calls “spray and pray marketing”:

  • Buying an ad in a publication using “branding” so you look like a big company building “awareness” – when what you really want are leads

     

  • Buying a list of prospects and sending an unsolicited email that goes for the offer without adding value first

     

  • Hiring expensive marketing consultants for a “strategic plan” that ends up not seeing the light of day because it’s too complex

Instead of “spray and pray,” Desmarais advises his clients on a leaner approach to business development that takes less time and money while resulting in more new deals.

He suggests entrepreneurs who desire more business look into hiring freelance consultants with specific skills in client acquisition, LinkedIn marketing to target key accounts and decision makers, and using cold email sequencing with tools like mailshake and getemail.io.

3. Use tax deductions strategically.

Based on the type of business you’re in, you’ll qualify for certain deductions. For example, a real estate agent can deduct the cost of meals and entertainment for clients, and a salesperson can deduct the cost of fuel or take the standard mileage deduction. In order to take full advantage of the deductions that apply to you, consult your tax preparer at the beginning of the year, so you know what to look for.

Throughout the year, track all of your expenses by keeping your receipts. If you’re more old fashioned, you can use a spreadsheet to do so and print out your business bank account statement monthly. Or, if you consider yourself to be a more modern entrepreneur, then you can download a free mobile finance and accounting app like Hurdlr. The importance of keeping receipts (or digital records, if you’re going the app route) is to justify your deductions in the case that your accountant or the IRS requests evidence.

While this record-keeping may feel tedious, this is an important accounting strategy for entrepreneurs. After all, by maximizing your tax deductions, you thereby lower your taxable income, the number off of which your business taxes are calculated. In doing so, you end up with more money in your pocket at the end of the year.

4. File taxes quarterly, not annually.

If you anticipate owing $1,000 or more in taxes for the year, then the IRS requires that you file your taxes quarterly. Filing taxes quarterly (if you meet this threshold) is beneficial in two ways. For one, you avoid IRS penalties that you could incur from paying late.

And second, paying four times per year helps you to better budget your tax expenses; it’s much easier to spread out your tax payments throughout the year, as opposed to making one huge cash payment in April

Learn More About Cyber Insurance

The rising threat to cyber security, with attacks like WannaCry increasing in number, along with the higher dependency on the web, has brought about the need for another arm in the insurance sector– cyber insurance. The idea to get your online business or data insured has so far been an alien concept to many in India. There are many insurance companies here that offer packages related to cyber insurance, but the idea still hasn’t taken off.

Overseas insurance companies have been offering cyber insurance keeping in mind the advent of tech companies. But in India, it’s a different scenario. “It’s a relatively new concept, especially in markets here. Abroad, it has been present for three-four years now. But as more and more transactions happen online, especially financial, incidents of cyber fraud are also increasing. Cyber terrorism is also a new threat, people are extorting others online, threatening them that their data will be destroyed if they don’t pay ransom,” said KG Krishnamoorthy Rao, the MD and CEO of Future Generali India Insurance, adding, “Even if cyber insurance is not popular now, all it needs is awareness and then there will be a market for this.”

His company is awaiting approvals to launch their cyber insurance package for the public.

Other market leaders, too agree, that awareness is key to this issue. “Most companies haven’t taken up this policy so far. It’s critical that when someone is transacting online, their information is not leaked or misused. It’s mostly the banking sector or payment wallets that urgently need cyber insurance. While the loss due to a cyber attack cannot be avoided, it can definitely be compensated,” said Shuporna Chakrabarty from AVP-IndiaFirst Life Insurance.

Cyber Insurance Coverage

Cyber insurance provides for a number of safety nets for an online business. Rao talked about some of the damages that are covered within cyber insurance. “Economic loss suffered by a client because of a cyber attack is eligible for insurance and the insurance company is liable to make up for the loss. Even the transmission of data because of an e-threat, where the data is destroyed, is covered by the policy. Another important factor is when the data is lost. The expenses to restore the data are covered by the insurance agent,” added Rao.

Challenges

While there are not many challenges in dealing with cyber insurance, Rao said expert intervention was required while handling these cases. “When a client claims a loss or damage, we need a cyber security expert to verify it. These damages are not easy to determine and it takes a longer time,” said Rao.

The problem so far exists in the fact that in India people still don’t know that they can claim this. “In India, we haven’t yet evolved to a point that we can sue a company saying that my information is leaked,” said Chakrabarty.