Innovative Features and Benefits: IDFC FIRST Bank’s Business Credit Cards Catering to Startup Needs
Imagine what it’s like to start a business that’s going to grow from one desk in your living room to a billion dollar unicorn that employs some of the finest minds in the industry. It’s a massive undertaking with a million little moving parts. And of course, you’re doing it all with a skeleton crew. And of course, your budget is tiny.
And while India’s startup ecosystem is creating great enablers for funding, technology, ease of filing paperwork, simplification of rules and compliances, early stage startups still struggle with accessibility of credit. Angel investors, VCs and institutional investors want to see all of their funding go towards growth generating activities – not the day to day running of your business. So, you need working capital loans. To qualify for working capital loans, you need to have a credit profile, need secured collateral and need to be profitable. For startups that are growing, that usually isn’t the case, because you are… well, growing!
Loans aside, even small credit in the form of credit cards is a problem for startups. To be fair, this is considered high risk product for banks. With the separation between the founder and entity, if the entity goes down, there’s no one they can recover the monies from. Early stage startups are inherently risky – not all of them make it. Moreover, most banks assess startups the same way they do MSMEs, and as the nature of the business and its growth potential is so different, startups rarely meet the qualification criteria.
Why would a startup need a credit card?
Well, for the same reasons any small business does: to keep accounting clean. Today, most of the utilities a business uses are subscription based – from the SaaS tools they use, to the Direct Marketing agencies they employ to coworking spaces, to database subscriptions, to purchasing cloud credits. As is the nature of subscription based services and products, most of these don’t accept bank transfers, debit cards, online wallets or UPI payments. They definitely  need a credit card.
Now, a founder can use their own credit card for these purposes, but it’s not ideal. Not only does this create issues from an accounting standpoint, but it also keeps the business from building its own credit score. Of course, all the benefits of the credit card usage accrue to the founder (discounts and reward points), and not the business – again, that creates a fuzzy concept for the accountants to wrap their heads around.
Moreover,during funding rounds, this becomes another item that funding committees must scrutinize and that doesn’t set the right tone for the business.
The Stop Gap Solution
A secured credit card. The founder pledges an FD, and the credit card is issued against this asset. Unfortunately, as a standard, banks offer only 80% of the FD’s value as the credit card limit. Now that hurts the entrepreneur twice: one, for blocking the capital in the first place, and second, for making 20% of that blocked capital completely inaccessible.
The IDFC FIRST Bank Advantage
IDFC FIRST Bank already understands and caters to the needs of Indian startups. It applied it’s learning to approach business credit cards differently.the Credit Cards offers benefits as such as allowing you to use 100% of your FD amount, from the get go. Based on your repayment history, in 9 month’s time, this can go up to 125%. Moreover, as you build your credit history, your access to other credit products also improves. The credit card is issued in the name of the business, to all the employees in the organization who need them. Since this is a credit product aimed at new businesses, the interest rate reflects the same. While the industry averages at 3%, IDFC First Bank’s  credit card comes in at a very pleasant 1.75%.
Now, to keep people accountable and prevent misuse, IDFC FIRST Bank offers Joint and Several Liability, in addition to the standard Corporate Liability option. In the former, the company and the employees are held liable for payments, creating a subtle mental filter in the way employees view card usage.
For startup core teams that travel, this card proves to be an excellent asset. For one, each card comes with free airport lounge access twice per quarter. You get free travel insurance covering contingencies like lost or delayed baggage, loss of passport and documents, flight delays. This combines with a cover of Rs 50,000 each on lost card liability, Credit Shield and Purchase Protection and Personal Accident Cover of 10 lakhs. Here’s the kicker though: your FX markup is just 1.99%, compared to the industry standard of 4%. Also, interest free cash withdrawals, wherever you are.
Moreover, you can earn up to 10x accelerated reward points for all international transactions done in foreign currencies. This means, you pay half as much in FX markup, while earning 10x reward points. Now, since IDFC FIRST Bank is focused on the needs of startups, they know you aren’t interested in spending your hard-earned reward points on some catalog items. Instead, you get to redeem your reward points on ALL major e-commerce platforms.
Of course, you earn accelerated reward points when you spend locally as well: business utilities, digital advertising, local travel, restaurants, and rentals all earn you a minimum of 2x reward points. Where the multiplier really kicks in, is when you combine these with IDFC FIRST Bank’s Beyond Banking offers. Choose from a host of services you need for your business (ERP & Accounting, HR & Payroll, Legal advisory, Taxation, Logistics, Co-Working Spaces, Field Sales Management, Travel, E-Commerce, Communication), each of which is heavily discounted. Then earn 2x-10x reward points on your IDFC FIRST Bank credit card. Then redeem those points when these payments roll around next month.
Conclusion
It almost sounds too good to be true, but it isn’t. What you see here is the outcome of a bank putting on its collective thinking hat, to bring you the advantages of the economies of scale they can enable. IDFC FIRST Bank sees India’s startups in the same way as early Silicon Valley investors saw their investments. In fact, IDFC FIRST Bank has joined hands with Moneycontrol and CNBCTV18 to create ‘Leap To Unicorn’, a one-of-its-kind Founder Success Program that provides mentoring, networking, and fundraising opportunities for India’s most promising startups through a meticulously planned journey. Registrations for Season 2 are open till Feb 29th, 2024. Check your eligibility here.
You are the future. You are solving problems, creating employment, powering innovation, and creating explosive growth for local economies and India’s economy on the whole. It only makes business sense to partner with you and enable you to reach your potential. IDFC FIRST Bank is making that move, and in doing so, creating an industry benchmark for other banks to follow.
