How Shashank Scaled a Bootstrapped Legacy Business Using Debt Capital?

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Companies face distinct hurdles when scaling, especially bootstrapped ones. Shashank observed that many of these companies become fixated on short-term profitability, which can distract from what truly matters. Without a solid foundation, it’s easy to lose sight of long-term goals.

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Bootstrapped startups often compete against well-funded companies that can subsidise their products. Shashank pointed out that while capital can offer a competitive edge, it can also lead to neglecting product quality. Balancing funding needs with business viability is essential. When significant capital raises are needed, traditional banks often fall short—especially for projects tied to government tenders. Shashank reflected on the limitations of relying on personal finances to bridge gaps as ambitions grow.

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To tackle cash flow issues, Shashank emphasized the importance of structured financing solutions like project-based and purchase order (PO) financing. He found unsecured debt facilities beneficial, as they require minimal paperwork and offer a fully digital process. This efficiency allows businesses to secure short-term capital quickly and focus on operations instead of getting bogged down in financial logistics.

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“Debt isn’t just about getting funds; it requires discipline,” Shashank noted. By taking on debt, founders must manage resources responsibly and maintain their business’s credibility. Each rupee spent matters because the consequences of failing to repay extend beyond finances—they can damage personal and business reputations.

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As you scale, focus on essential financial metrics, not convoluted calculations. Pay attention to these areas:

1.Cash Flow Management: Are there recurring gaps between incoming payments and outgoing supplier obligations?

2.Profitability Insights: Regularly review profit and loss statements to stay profitable.

3.Cost of Capital: Understand the impact of interest payments and overdraft usage; these can signal deeper financial issues.

4.Efficient Capital Utilisation: Ensure your capital is used effectively, especially in low-margin sectors like distribution.

5.Inventory Optimization: Keep your inventory holding period as short as possible to reduce costs.

Shashank also highlighted the strategic value of equity partnerships. Rather than seeking equity just for funding, look for opportunities that can open new markets and resources. Working with investors who share your vision can lead to mutually beneficial outcomes.

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