Raising fund

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 July 2013 Dear Sir,

I have a project which requires amount of Rs. 7 Cr. to start.

I am planning to incorporate a Pvt. Company.

Can you please let me know, how i can raise the capital of Rs. 6 Cr.?

My Planning is to Incorporate a Pvt. Company and by way of allotment and loan, want to raise capital. But I am confuse how to start the process, also don't know the exact the ratio.

Plz Help

Srirang Mahabhagwat

Srirang Mahabhagwat (Expert)
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20 July 2013 DEAR Friend,

In case you are incorporating pvt ltd company, then you can allot shares only to the promoters of the company. also you can obtain loan from shareholders, directors and not general public.

Querist : Anonymous

Querist : Anonymous (Querist)

22 July 2013 Dear Sir,

Thanks for the reply;

I have mentioned that I am going to raise the fund by way of allotment and loan; where i have planned to raise fund of rs. 2 cr. by way of incorporation of the company, allotting shares to the directors where in other side wanted to raise fund of Rs. 7 Cr. by way of loan only and for that I need suggestion. Should i go for bank loan or project loan? or any other mode, where i have to pay least interest.

Thanks

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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19 July 2025 Your Plan:
Incorporate a Private Limited Company.
Raise ₹2 Cr by allotting shares to promoters/directors.
Raise ₹7 Cr by way of loan.
Key points & suggestions:
1. Equity Portion (₹2 Cr)

This is straightforward: allot shares to promoters/directors.
The paid-up capital becomes ₹2 Cr.
2. Debt Portion (₹7 Cr)

You have two options primarily:

A. Bank Loan (Term Loan / Project Loan)

Term Loan: Usually secured by company assets, can be long-term.
Working Capital Loan: For operational needs.
Interest rate depends on credit rating, bank policies, and collateral.
Generally lower interest than informal loans.
B. Loan from Promoters/Directors

Sometimes called “Inter-Corporate Loans” or “Shareholder’s Loan.”
Flexible terms, but may have higher interest rates or be interest-free.
Helps avoid bank formalities initially.
C. Alternative Funding

NBFC loans or financial institutions.
Venture debt or private equity (if suitable).
Government subsidies or grants if eligible.
Which loan to choose?
Bank/Project Loan: Ideal if you have a solid business plan, collateral, and good credit history. Interest is generally lower but involves formal documentation, processing fees, and longer approval time.
Promoter Loan: Quicker and flexible, but may be limited by promoters' capacity.
Recommendations:
Start with incorporation and allotment of shares to directors/promoters.
Prepare a detailed project report and financial projections.
Approach banks/NBFCs for term loans/project loans—compare interest rates and tenure.
Consider combining both (some from bank, some from promoters).
Keep your debt-equity ratio balanced. Generally, a 1:2 or 1:3 debt-to-equity ratio is considered healthy, but it varies by sector.

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