Start-ups usually only have the "body of the founder", what is the basis for borrowing capital from banks?

Access to bank credit capital is always a big challenge for start-ups. However, according to the general director of Orient Commercial Bank (OCB), there are still ways to solve this problem.

Mr. Pham Hong Hai, General Director of OCB , shared at the event Banking innovation for startups - Photo: HP

Speaking at the Banking innovation for startups event organized by Genesia Ventures and OCB on the afternoon of July 18, Mr. Pham Hong Hai, General Director of OCB, shared that traditional banking thinking is very difficult to change.

When considering a loan, the first question is often "Does the business have collateral?", while many start-ups only have "the founder's body" as capital.

Is there any collateral?

The term "collateral" is not only a familiar term in the traditional financial world, but also a part of the risk management mechanism in the industry. Collateral helps banks have a basis to recover capital when risks occur.

However, for startups, which have innovative business models and few tangible assets, this requirement becomes inadequate.

Another barrier is that the debt-to-equity ratio of startups is often high. Due to the nature of rapid development and the need to "burn money" in the early stages, startups have a large capital need but little equity. This increases concerns about credit risk from banks.

Not only that, the differences in operating models, business strategies and operational organizations make it difficult for banks' credit analysis departments to assess and manage risks for start-ups.

According to Mr. Hai, banks also need to continue to improve their ability to evaluate start-up businesses. Because the operating model, business strategy, organization... of start-ups are very different from traditional businesses.

Assets from people and cash flow

Changing approaches is inevitable if banks want to support startups.

According to Mr. Hai, trust in the founder is the top factor. Not only with startups, but with any business, if the leader cannot create trust, no matter how "beautiful" the financial figures are, the loan will be difficult to approve.

In addition, if the founder has started many businesses (both successful and failed), has experience and commitment, it will create great trust for the bank. This factor sometimes cannot be measured by data, but needs to be felt through contact and overall assessment of the person.

In addition to tangible assets, a start-up with a good business model that generates a steady cash flow will be able to convince banks. For example, he said, banks need to control exactly where the money comes from. If the start-up provides services to reputable partners such as Pepsi, Coca, Microsoft, etc., the revenue is easy to quantify, ensuring real and transparent cash flow.

"No collateral is needed, but the cash flow must flow through the bank so that the bank can monitor and manage risks," Mr. Hai shared. Start-ups with good business plans and stable cash flow should "confidently talk to the bank."

According to him, banks will always ask the question: "In the worst case, how can I handle the collateral?" If the asset cannot be recovered (even if it seems very valuable on paper), it is very difficult for the bank to accept it as official collateral.

HONG PHUC

Source: https://tuoitre.vn/start-up-thuong-chi-co-cai-than-cua-nha-sang-lap-co-so-nao-de-vay-von-ngan-hang-20250718174541079.htm