However, of late, even banks have started lending for longer term periods for fixed capital requirements. Here again, lending is done against hypothecation of the assets of the enterprise and personal guarantee of the entrepreneur is also taken so that recourse may be had to him in case of default by the enterprise. An aspect which cannot be under-stressed is that of honesty and integrity. Though fudging of accounts or indulging in corrupt practices may lead to some short term benefits, in the long term, it can lead to several problems especially if one is looking to funding from venture capital funds. The ruthless manner in which stocks of companies whose managements are perceived to be corrupt or inefficient are dumped is well known.
Venture capitalists can do the same where the entrepreneur's intergrity is supect.
In any case, venture capital funds conduct a very stringent due diligence analysis before commting funds to any enterprise. It is very essential to ensure legal compliances from the very beginning. The help of a consultant may be taken for ensuring regulatory compliances. One of the aspects venture capital funds take into consideration are the extent of legal compliance. Therefore, though, it may lead to short terms savings in taxes by fudging accounts, future growth may be adversely affected by such practices.