Indian startups are lining up for a dash of debt financing

Traditionally, the Indian startup community has not been enthused by debt funding. But traditions are apparently meant to be broken. Why more and more startups are lining up for a dash of debt financing.The cautious approach adopted by large equity investors has compelled startups to find newer avenues of funding. Entrepreneurs are hence warming up to debt funding from companies that provide working capital loans. And the poster boys of the startup world are welcoming this change. Naveen Tewari, Co-founder & Chief Executive Officer, Inmobi, suggests every startup go in for a debt round. "Its a cheaper form of capital, if your financials allow for it," he says.The biggest advantages of debt funding is that it allows startups to raise money with little or no equity dilution. Just like bank loans, venture debt has to be paid     back in 2-3 years. Though interest rates are on the higher side -- between 15-19 percent -- it's not bieng seen as a deterrent. There has been an overall slowdown in venture capital funding. This has fuelled the surge in debt funding deals that have been struck in the last 12 months.Whether it's the USD 100 million in debt raised by Inmobi from US-based Tennenbaum Capital Partners, or the USD 3 million raised by fashion e-tailer Voonik from Innoven Capital, there has been a surge in such deals.More are on the anvil with the next big one expected to be debt raised by hotel agregator Oyo rooms, and rentals platform Rentomojo.