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Funds crunch post-Corona may force start-ups to shut shop

Many start-ups could fold up sooner than later as B2B and B2C transactions plummet as a result of lockdown and shutdown across the country

Funds crunch post-Corona may force start-ups to shut shop

Shashank Moddhia of healthcare start-up The Renal Project contacted executives of Bank of Baroda and IDBI at their Juhu branches in Mumbai a few days back for a Rs 10 lakh Mudra loan but none of them responded to his requirement.

As sanction or disbursal of fresh loan figures on the bottom of most banks' priority list following restrictions imposed by the government to contain Covid-19 cases, entrepreneurs like Moddhia who are unlikely to get loans may have to shut down operations.

"For instance, if I cannot get a loan to take care of my fixed costs, and if I had to shut down just one center, it means some 30 patients may not get timely dialysis and may cause risk to their lives," the bio-medical engineer-turned-entrepreneur said.

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Geetha Manjunath, CEO and CTO of another start-up firm does not face imminent crisis but says she may not find it easy to raise funds in the next round as some performance metrics have fallen sharply.

There are many start-ups in a similar situation or even worse as the Corona crisis deepens in the country. As most of them live by the day, absence of financial support by the government could put a question mark on their survival. Many could fold up sooner than later as B2B and B2C transactions plummet as a result of lockdown and shutdown across the country.

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"There is a serious impact on start-ups and SMEs. First, banks have squeezed on lending. Then, there are supply challenges with the manufacturing sector. It has led to serious liquidity issue for the start-ups," said KR Sekar, Partner, Deloitte.

Even for start-ups which are adequately funded, tough times are ahead. Many fintech start-ups have seen business going down by nearly half as the twin impact of Yes Bank collapse and Coronavirus weigh heavy on them. Pune-based LoanTap has been severely hit as events are being cancelled and travel plans postponed. Satyam Kumar, founder and CEO, LoanTap said he had deferred hiring plans for the coming fiscal as the businesses had seen downward trend.

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