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The Good, the Bad, and the Ugly of Debt Deals on Shark Tank India

Navigating the Risks and Rewards of Debt Deals on Shark Tank India and Beyond

6 March 2023


Kunal Tyagi

India produced 3X more unicorns than China in 2022.png
  • The amount of debt that competitors are being offered has increased on Shark Tank India.

  • Due to limitations and hobby payments, experts advise against lending offers for businesses.

  • For firms with stable income and profit sources, debt offerings may be wise.

The number of debt arrangements given to competitors has increased on the popular business reality program Shark Tank India. As of three March, 32 offers contained debt out of the 148 pitches that were broadcast throughout the current season, or 0.33 of all deals presented. Because interest payments might be difficult to make from shaky surpluses and put the entire firm at risk, potentially leading to the company's closure, experts advise avoiding loan agreements.

Additionally, because of the risk associated with their embryonic enterprises, entrepreneurs borrow money at very high-interest rates. Thus, it is no longer recommended to take on debt in the early years when the business is not making enough money to pay off the loan. Debt offerings also include several dos and don'ts that might limit a startup's willingness to take certain risks or wagers during its scale-up journey and impede its development.

In addition, it may be quite challenging for fledgling firms, especially in the beginning, to maintain regular loan interest payments. A major consequence of not paying the usual rate of interest is that it would be seen as a default, which might result in financial ruin and legal action against the company's founders. Thus, debt offers should indicate catastrophe for startups who usually no longer have the most beneficial flow of revenue, and the cash spent on paying returned the interest may desire to have been instead invested in developing firms.

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Debt offers, however, might be advantageous for firms that have identified their sources of income. These businesses likely need more funding to grow up or extend their operations, and a loan agreement assures that their revenues are no longer split between many equity investors. However, only a few startups are affected by this. One reason why entrepreneurs participate in the program is the increase in loans that are given out with the Sharks' assistance. They go there in the hopes of receiving stock because the shark already owns a portion of their company and will actively assist them in building it. Yet since debt is impersonal and dealings with funds that are opaque and lessen the risk, the issue arises: Are these people sharks or mortgage sharks?

Sharks from the US Shark Tank, including tech billionaire Mark Cuban, have condemned the practice of rolling out debt-related projects, yet there are also plenty of debt-related opportunities on the US version of the show. Debt from institutional sources, such as accelerators, VC funds, business innovation programs, etc., may provide learnings and direction as well as access to other investors, potential consumers, and partners that can be

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