Plastic money has revolutionised the commercial world in the last two decades, both for consumers as well as business owners. With the recent demonetization, more customers are compelled to use cards to purchase goods and avail services. An increasing number of merchants are installing point-of-sale card machines to ensure that sales are unaffected. After all, a card swipe is undoubtedly quicker and more convenient than cash.
Now, the receipts of those card swipes can help you raise capital to expand your business operations. Whether you’re a retailer, restaurateur, or a small-to-medium business owner whose revenue comes primarily from credit and debit card sales, Capital Float’s ‘Merchant Cash Advance’ is a quick, hassle-free financing option to fund all your working capital needs.
With Merchant Cash Advance, you can receive up to 200% of your monthly sales from card payment machines. The repayment process is entirely hassle-free on your part. Your POS partner repays a percentage of your daily card sales on your behalf as instalment for the loan. The balance amount is paid to you on a daily basis. So, instead of being burdened by hefty fixed repayments every month, you pay an agreed-upon percentage of your daily credit/debit card sales, until the advance is paid in full.
- Loan amount of up to Rs. 1 cr
Traditional banks aren’t as generous when it comes to how much you can borrow. Add to that the piles of documentation and proofs of credit score that you need to submit, which only elongate the process. At Capital Float, on the other hand, you’re eligible for an advance of up to Rs. 1 cr, depending upon your monthly card settlement and ability to repay between a tenure of 6 months to a year.
- Loan tenure of 6 months to 1 year
Every line of business has different challenges and requirements. We understand the importance of providing flexible credit offerings that are tailored to your business need. You can avail Merchant Cash Advance for a period varying between six months to one year. If you have a short-term working capital need, a six-month long loan might be ideal. Similarly, if your need involves securing a larger loan and if you would like to spread out the repayment schedule, you could take the loan for a period of one year.
- Get up to 200% finance on your monthly card machine sales
With Merchant Cash Advance, you can receive up to 200% working capital finance on monthly sales from card machines. As more customers use debit and credit cards to shop, your sales from point-of-sale machines is likely to increase significantly. These sales records can help you avail quick finance that you could channel into running your business. Our sophisticated loan product opens a new avenue of formal financing for you, as you seek credit channels to leverage business opportunities.
- Cash-flow friendly daily repayments
Usually, small business loans have a fixed repayment plan, wherein, you pay the same amount every month based upon the agreed-upon interest rate. At Capital Float, you pay back as per your daily credit/debit sales. Take, for example, if the agreed upon repayment is 15% of your credit card receipts, we will deduct 15% in proportion to how much business you’ve done through the day, until the repayment is done in full.
- Get funding in 3 days
It’s a highly competitive business world, and in case a potential opportunity knocks on your door, the last thing you want to do is wait for the funds to reach you. One of the many USPs of Merchant Cash Advance is its potential for fast approval and disbursal. Through our data-driven competencies, we render a decision within hours and deliver funds to you within 72 hours, so that you waste no time in covering an unexpected business expense or capitalising on a lucrative business opportunity.
- Zero collateral
Traditional banks cover their risk by taking collateral form the borrower while giving a loan. Given the completely unsecured nature of Merchant Cash Advance, you don’t have to put any personal or business assets on the line. All we require is your banking documents for last 12 months, KYC documents, VAT returns for last six months and card settlement statements for 3 months prior to loan application.
- Simple and secure online process
Like many small business loans of this type, you can apply for an advance from wherever you are, as long as you have a computer or cell phone with an internet connection. The procedure is extremely simple, and takes a mere ten minutes of your time. All you need to do is fill out an application form, upload the necessary documentation. The process is designed to be convenient for you. We maintain strict security protocols, safeguarding your data at all times.
Eligibility and Documents
To qualify for a loan at Merchant Cash Advance, you must comply with the following parameters:
- Your business must have minimum operational history of 1 year
- Minimum turnover of ₹20,00,000
- Minimum card acceptance vintage of 6 months
- Minimum monthly card volume of ₹1,00,000
- Minimum of six settlements per month
- Your banking documents for last 12 months
- VAT returns for last six months prior to loan application
- Card settlement statements for 3 months prior to loan application. All acquirer banks, except American Express, are eligible.
- The company’s as well as the promoter’s KYC documents
Fees and Charges
At Capital Float, we conduct business in the most transparent manner. This means, you’re only obligated to pay a processing fee of up to 2% for the loan. There are no hidden or pre-closure penalties during or after your application procedure.
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The growth of the SME (small and medium enterprises) segment, which contributed nearly 40% of India’s exports, has been restricted by the lack of access to timely finance. Only 4% of 57.7 million small business units in the country have access to formalized finance, leaving many to rely on informal lenders, who charge exorbitant interest rates. Requirements like collateral and detailed documentation as well as the long processing and disbursement time of loans deter SMEs from approaching traditional financial institutions. Thus continues the huge gap between the need for funds by SMEs and the amount of funds actually approved as loans.
This severe shortfall needed to be addressed, especially given the importance of SMEs to India’s economy. This is where FinTech companies like Capital Float have risen to the occasion, offering new business loans that are aligned to address specific needs of the SME sector. While cutting-edge technology is being deployed to make innovative financial products available to smaller businesses, SMEs must be aware of the available finance options to take make an informed decision.
SMEs make some common mistakes when applying for secured and unsecured loans. As a result of these mistakes, their loan applications may get rejected. Here are some tips for small businesses to avoid rejection of their business loan applications.
Banks and other lending institutions would require certain documents to verify the claims made by a business. The decision to sanction a loan is taken by the lender after evaluating the prospects of a business, its ability to repay the loan amount and its previous credit record. This is done by checking various documents certifying the presence and existence of a business, its financial statements, taxes paid by it and other documents that indicate the financial standing of the business and the business owner(s). To ensure speedy approval of its loan application, a business must organize its documents and submit these in an orderly manner to the lending firm.
Any kind of delay in submitting the desired documents may be viewed negatively by the lender and could even derail the whole process. So, every business seeking a short term loan needs to be organized about its documentation. All the papers should be ready for submission when applying online for a loan. Your swiftness in providing the necessary information along with requisite documents can speed up the approval process.
Be Mindful of Your Credit Profile
The credit profile of the business owner or owners plays a key role in the ability of the SME to secure a business loan. Ensuring a good credit profile is not difficult. This is possible by ensuring that all your credit card and bill payments are made on time. The timely repayment of all due amounts including the ones relating to any existing loans helps improve the credit score.
Often business owners ignore their credit score thinking that it would not impact their ability to secure a loan for their business. They fail to understand the significant negative impact this can have on their business. It is important for business owners to regularly check their credit scores and take the necessary steps to improve them. Such efforts can ease the process of securing finance for the business in the future. In some cases, the credit scores do not even reflect the true situation. Regular monitoring can help business owners rectify the errors in the scores and boost their chances of getting loans on time.
Have A Firm Business Plan
Seeking loans without any kind of business plan may result in the loan application being rejected. A business plan is a reflection of the goals, the purpose of a business and ways to achieve them. It shows how a business intends to operate and how much funds are needed and at what time. A clear business plan not only helps a small business to ease the process of loan application, but also to determine the specific amount of funds required. This in turn enables the business to apply for a business loan well in advance besides providing the lender clarity into the purpose for which the loan is sought.
Thus, a well laid out business plan helps a business provide answers to questions like:
- How much loan is required and for what purpose?
- How quickly are the funds required and for what duration?
- What is the current financial standing of the business and when will the business be able to repay the borrowed amount?
- Does the business need secured or unsecured loans?
With FinTech lenders like Capital Float offering an array of innovative products, small businesses also need clarity to enable them to choose the loan that is most appropriate for them. A business plan would also help with this. In the absence of a business plan, the screening process may take longer and the chances of rejection of the loan application are also higher.
A business seeking a loan should not borrow from the first lender it comes across. Instead, it’s advisable to do thorough research and compare the loan terms offered.
Capital Float helps small businesses seeking loans to identify the right type of loan for their working capital needs, besides offering multiple repayment options. The use of advanced algorithms helps to underwrite businesses uniquely, check the repayment ability in absence of credit scores and develop customized lending solutions to suit the individual requirements of potential borrowers.
Oct 24, 2018
Loan Products in the Market for SMEs: 5 Steps to find the best Business loan type for your Business Requirements
An enterprise that has a strategic business plan for its growth but not enough cash to execute the same can approach institutional lenders for funds. There are multiple sources of procuring a working capital loan in the organised credit market. These include private and public sector banks, development banks and non-banking finance companies (NBFCs).
The digitally enabled NBFCs known as FinTech lending companies have become some of the major lenders supporting the growth of micro, small and medium enterprises (MSMEs, SMEs) around the world. In India too, the FinTech lending model is becoming popular, and start-ups find it more convenient to borrow from them as these companies offer unsecured business loans.
What kind of businesses can borrow from a FinTech company? How to apply for a FinTech SME or MSME loan? Could this be a month-long process like most other institutional lending systems? These are some of the questions that organisations not acquainted with the digital lending framework ask. And the answers bring relief to most of them.
In their mission to support the Make in India initiative, established FinTech companies are coming forward to assist as many enterprises as possible. They have a diversified array of products that include working capital loan, term loan, supply chain finance, machinery loan and other funds customised for different commercial needs.
You need to take merely 5 steps to find the best business loan type for your business requirement when you decide to approach a FinTech company for finance.
Before we further look into these five steps, here is some more information on the different types of funds provided by these digital lenders:
Working Capital Loan—This form of finance helps sustain the regular operations of any business. It is usually taken for a short term – up to 12 months – to procure additional raw materials, buy inventory, pay for utilities and to give advance payments to suppliers. Your business can use this loan as a cash cushion and manage seasonal sale fluctuations.
Term Loan—FinTech companies also offer loans for longer tenures when businesses need to make bigger investments. When the loan amount taken by an SME is approximately Rs 20 lakhs to 50 lakhs, it can be paid it back in 2- 3 years in small instalments. Term loans can be taken by any manufacturer, trader, distributor or professional service provider.
MCA Loan—A Merchant Cash Advance (MCA) loan is a funding option open to businesses that frequently accept card-based payments from their customers. The FinTech lender looks at the monthly credit or debit card receipts to determine the creditworthiness of a borrower. Eligible businesses in Indian can borrow between Rs 1 lakh and 1 crore as per their average card settlements. The loan can be paid back in 9 to 12 months.
Machinery Loan—As the name conveys this loan is procured to purchase machines and equipment used in the manufacturing processes. Businesses in construction, packaging, fabrication, and assembling of products can use these loans to overcome temporary financial roadblocks. FinTechs have flexible repayment terms for such loans.
Invoice Finance—Another customised business loan for SMEs and MSMEs, invoice financing enables businesses to borrow against their Account Receivables. If your company needs immediate cash to fund operations, but your clients will process your bills at later dates, you may be eligible to get quick invoice finance from a FinTech company.
Pay Later Loan—An SME loan in the form of a pay later finance comes with a pre-defined amount that is exclusive to each business as per its requirements and earning capacity. On this loan borrowers can make multiple draw-downs within the approved limit. They just need to pay back the sums used to reinstate the balance for further usage. It is a rolling credit product to help small businesses pay their suppliers at short notices. The top benefit of this loan is that the interest is charged only on the amount used and not the full limit approved for the borrower.
Supply Chain Finance—A tailored loan to help dealers and suppliers having business relationships with large, blue-chip companies, supply chain finance can be availed to buy inventory, improve cash flow, reduce the cost of goods sold (COGS), improve sales, and ensure the timely availability of goods for consumers. With supply chain finance, the borrowing business can reduce its dependence on the buyer while benefiting from the fluidity in its financial position.
FinTechs also offer bespoke funding for specific professions and businesses. These may be in the form of a school loan, doctor loan, online seller finance, franchise finance, petrol pump loan, restaurant loan or a loan for any other legally permissible business.
5 steps to find the best business loan type for your business requirements
When a FinTech company offers a custom loan product for your line of business/profession, it is important to identify the right kind of finance product. It is thus good to be aware of the general ways to choose the right SME or MSME loan.
- Make a note of your requirements—When your business has a good credit rating, it can be tempting to borrow a sum larger than what you need. You may want to keep a bigger cash reserve for working capital. This, however, is a wrong strategy. Remember that as the loan amount increases your instalments to repay it will also be bigger. It is advisable to use a business loan EMI calculator to know the sum that you can repay and apply for the correct amount of funds that will fulfil your need.
- Check your eligibility—Borrowers are often asked to pledge some financial asset as security, to be eligible for most of the conventional loans. However, FinTechs offer unsecured loans and check the creditworthiness of borrowers on the basis of years in operation, revenue earnings, past loan history if any and compliance of the business with tax laws. You can check your eligibility criteria relating to specific loans by referring to the lender’s website or speaking to their customer service team.
- Compare loan costs on all parameters—Do not be instantly allured to loans that advertise low interest rates. Such an SME loan may also have a loan processing fee of 3% or more, and multiple hidden charges such as a legal fee, documentation fee, insurance premium and other statutory payments. On the other hand FinTech loans that have a slightly high interest rate come with just a processing fee of up to 2% and no hidden fees.
- Collate the required documents—To verify the information filled in a loan application you will need to have your KYC documents, copies of the latest tax returns, bank statements and few other papers as per the nature of the loan sought. The benefit of going for a FinTech loan here is that you only need to upload soft copies of such documents as the loan application is made digitally.
- Apply for the loan—Once you have understood your requirements, eligibility, cost of the loan and have collected the required papers, the last step is to apply for the funds. When you make a digital application, ensure that the lender has a secure website that will encrypt all your personal and business details.
At Capital Float every business loan application is reviewed within minutes of its submission, and if approved, the fund is disbursed in the next 2-3 business days. At the end of these 5 steps to find the best business loan type for your business requirement, you can be rest assured that you have the right amount that you wish to add to your working capital and the right loan type from the collection of credit products at Capital Float that is customised for your needs.
Oct 24, 2018
The Union Budget for FY18-19 was much anticipated, owing to reasons more than one. The first full-fledged financial plan after the introduction of GST and the last one by the Narendra Modi-led government, the most significant event of the Indian financial year is over. With the national polls looming in, the Union Budget rolled out by finance minister Arun Jaitely was favourable towards agriculture, rural development, social infrastructure and digital transformation. However, international mobile phone companies, bond investors, equity servicing institutions and the defence sector are at the not-so-advantageous end of the spectrum. In general, this year’s Union Budget has been a shift from the typical stance of the government that all segments need equal attention.
An industry segment that sees clear growth opportunities is retail. Amidst public opinion that the budget had not mentioned the retail segment, the various provisions have subtle repercussions that will help widen the scope of consumption. Consequently, this will have a long-term impact on retailers, where they can reap benefits from consumers with a higher expendable income.
Here are the key provisions of the Union Budget for FY 18-19 that have relevant implications for retailers.
- Reduction in Corporate Tax
With regards to taxation, the budget has declared a reduction in corporate tax to 25% for companies with an annual turnover of up to Rs 250 crore. This accounts for almost 99% of the companies in India and would have an impact of Rs 7000 crore on government finances. As only 250 companies have a turnover above the threshold value, this is a significant reduction in terms of the business turnover cutoff of Rs 50 crore that had been announced in last year’s budget for the same tax bracket.
This move has resulted in a decrease in the tax burden for small and medium businesses, who can now use these additional funds to purchase inventory or machinery, expand their premises, hire new employees or for marketing activities. In case it does not cover your entire expenses, retailers can also avail easy business finance from digitally-enabled FinTech lenders who provide customized credit products like Merchant Cash Advance.
- Increased Investments in Digital India
Lack of investment in digital infrastructure by the government has always been a pain point that has deterred the productivity and development of startups and small businesses. This is especially true for the e-commerce sector, as rural India is the driving force behind its growth. This year alone, e-tailers recorded a three-fold increase in the number of shoppers in small towns compared to metro cities.
Under the massive Rs 3,073 crore Digital India Program, over 5 lakh Wi-Fi hotspots will be set up to provide broadband access to 20 crore rural citizens in over 2,50,000 villages. This opens up an avenue for individuals in rural India to harness the Internet for trade, banking, logistics and even to avail formal finance from digital lenders. E-commerce retailers can use this opportunity to its fullest, as 55% of the 185 million active consumers are predicted to be from rural India by 2020.
- Changes in Personal Taxation
A welcome move for the salaried middle class, this budget proposed a standard deduction of Rs 40,000 for transport allowance and medical reimbursement. While this may seem irrelevant to retailers, the impact of this allowance does indeed affect them. As personal income increases, so does the disposable component. Consumer behavioral studies ascertain that the disposable income is equitable to spends on retail. Thus, the re-introduction of medical and travel benefits is a favourable budget impact on retailers.
- Refinancing for MSMEs
The micro, small and medium enterprise (MSME) sector plays a major role as India progresses towards becoming one of the biggest economies in the world. Despite contributing a staggering 15% to the country’s GDP with a high market share of 40% towards employment, these businesses have an unmet credit demand of $ 400 billion.
Acknowledging the fact, the budget declared an allocation of Rs 3794 crore to the MSME sector for credit support, capital and interest subsidy on innovation. With this reform in play, the refinancing policy and eligibility criteria under Micro Units Development and Refinance Agency (MUDRA) program will be reviewed to encourage easier financing of MSMEs by NBFCs. This impact of the budget on retailers opens plenty of avenues avail formal source of finance in a timely manner.
A unique Aadhaar-like identity for each enterprise will also be implemented for streamlining business identity. This measure can further enable Fintech lenders like Capital Float to process eKYC of enterprises swiftly and offer working capital finance in a matter of seconds.
Oct 24, 2018