Bank Financing for Startups

Having spent over 15 years in the banking sector, working across credit, risk management and even marketing, I have witnessed the evolving relationship between banks and entrepreneurs. Yet, what continues to inspire me is the passion and belief I see in the eyes of aspiring entrepreneurs: a belief that their idea can bring real change, right here in Nepal.

If you are planning to launch a startup or scale your growing business, one of the first questions you are likely asking is: “Where’s the money going to come from?” You may assume banks are only for established businesses, but I assure you that banking doors are opening wider than ever for startups in Nepal. It is not just about numbers anymore; it is about investing in the future. That future is you.

A Promising Time for Entrepreneurs

Nepal is entering an exciting era for entrepreneurship, with banks increasingly attentive to the needs of emerging businesses. Here is how you can leverage this momentum:

1. Access to Collateral-free Loans: The government has introduced startup financing schemes offering loans of up to Rs 2.5 million without collateral. With interest rates as low as 3% per annum and repayment periods of up to seven years, these schemes offer a significant opportunity for entrepreneurs to get their ventures off the ground.

2. Regulatory Support: The Nepal Rastra Bank has mandated commercial banks to allocate more funding toward priority sectors, which now includes startups. This has made banks more receptive to new business proposals and less reliant on traditional lending metrics alone.

3. Tailored Loan Options: Banks now offer a diverse range of loan products tailored to business needs. Need cash for a new machine or to set up your dream office space? A Term Loan could be perfect. Struggling with day-to-day expenses, managing inventory, or waiting on client payments? Let’s talk about Working Capital Loans or Overdrafts. Many banks now offer dedicated SME loan packages, designed to be more straightforward. And if you are starting small, Microfinance options are still a powerful first step.

4. Sector-specific Support: If your business operates in priority sectors such as agriculture, tourism, technology, or export-oriented industries, you may be eligible for even more favorable terms.

5. The Power of Good Company: Support from incubators or accelerators adds credibility to your venture. It signals to bankers that your idea has been vetted and guided which greatly increases our confidence in you.

Common Challenges in Startup Financing

While there are significant opportunities, securing a bank loan is still a serious financial commitment. Here are some common challenges and how we can overcome them together:

1. Incomplete Business Plans: Your business plan is the lens through which we view your vision. A strong plan should clearly outline your market, strategy, revenue model, team, how the loan will enable your growth and how you will pay back. Avoid vague proposals; make the plan data-driven, realistic and structured. Seek guidance from financial advisors if needed.

2. Collateral Limitations: For larger loans, collateral is an important consideration for banks. While collateral-free options are a good starting point, if your capital needs exceed those limits, banks may accept alternatives such as personal guarantees or flexible arrangements, particularly if your business plan is robust and shows clear growth potential.

3. Lack of Operational History: Many startups are denied financing due to lack of prior performance. In such cases, emphasize the strength of your team, early customer validation, pilot runs or any traction you have gained so far. Your passion, paired with a thoughtful, well-researched plan, can make a powerful impression.

4. Unrealistic Financial Projections: We often encounter business plans with overly optimistic revenue expectations or unclear repayment strategies. Your projections must be realistic and supported by data. Explain your costs, expected revenues and pricing structure. Show us how your repayment will work; not just in theory, but in practice.

5. Incomplete Documentation: Missing documents or perceived withholding of information can delay or derail your application. Ensure your legal and financial records, such as company registration, PAN/VAT certificates, identification documents, and financial statements, are organized and ready. If you are facing any problem, do let us know. Transparency in the entire process is essential. The more we understand you, the better we can help you find a path forward.

A Checklist for Aspiring Borrowers

It is essential to be well-prepared and understand what banks expect to improve your chances of success. The following checklist highlights key areas to focus on:

Your Checklist for a Smoother Loan Journey

Do your research: Look into the details of various schemes. What are the specific requirements for startups like yours? Factors like business age, capital, turnover, team size, use of technology and R&D spending matter a lot.

Refine your business plan: Make your business plan detailed, well-structured and compelling so that banks can understand your vision and assess its potential.

Know your numbers: Be ready to discuss projections, margins, cash flow and repayment. Your confidence in the numbers builds our confidence in your business.

Maintain a strong credit history: A clean credit report boosts your reliability. If you have personal loans or credit cards, a good repayment history helps build your credibility as a responsible borrower.

Leverage networks: Connect with mentors, advisors, or startup hubs. Their guidance can help you avoid pitfalls and refine your strategy.

Let’s Build Together

Do not hesitate to reach out to your bank before applying. Conversations can help us better understand your vision and support you more effectively. We may also visit your business to assess its potential—so transparency and preparation are key.

Building a startup demands courage, resilience and passion. The journey is never easy, but the rewards—job creation, innovation and meaningful impact—are worth it. With stronger government support and a more open-minded banking sector, access to financing is more attainable than ever.

So prepare well, articulate your vision clearly and take that bold step forward. Show us the incredible potential of your Nepali dream.

We are ready to listen, and more importantly, we are ready to support you.

Let’s turn your dream into reality.

(This opinion article was originally publihsed in August 2025 issue of New Business Age Magazine.)