Start-up finance/Collateral security

Collateral Security: Collateral is the physical proof required by a bank before a loan (usually an amount considered huge) is given to a loan applicant e.g. a car, house, plot of land etc. This property (collateral) will be confiscated by the bank in case the applicant defaults in payment of the loan.

The bank has to perform a risk assessment for the business model. There is always the possibility that a start-up business model fails and therefore the banks requires (e.g. for young entrepreneurs) to have access to values or properity of the loan applicant, who presented the business proposals to loan provider for financial support.

Learning Task

 * (Role Play) You need two learners. One learner is playing the role of loan applicant and other learner plays the role of a stuff member in a bank.
 * (Business Idea) The loan applicant wants to create a business of renting a battery trailer for electric cars. For the electric car it is a challenge that it take a long time to load the battery of an electric car before the car can leave the charge facility. The business idea The battery trailer
 * (Role: Loan Applicant) What are your arguments for the business model and are you aware of the potential risks? Where do you want to role out the business model. Do you know how much customers could benefit from your service?
 * (Role: Loan Provide) What is your return of investment? How do you calculate your risk of loosing the loan or parts of it? What are your checks for the business model of the applicant
 * Learning Task tailored to Developing Countries : Develop a start-up business model that provides a service with mobile devices, that allows other small and medium business entrprises to sell their products to local and regional markets. Calculate the money that is necessary for your business model and perform the role play between Loan Applicant and Staff Member of the Bank.