Online Seller Finance – working capital loans for e-commerce merchants

The fact that ecommerce is growing exponentially all over the world is undeniable. Entrepreneurs everywhere are competing with each other to get a piece of this lucrative pie. Definitely, starting a business in the virtual world entails much less costs, making it easier for more and more people to fulfill their dreams of running their own enterprise.

However, even with ecommerce, there are some things that do need to get taken care. For instance, you will need an impactful website that stands out among the crowd and you will need products and/or services that the market is currently looking for. You will also need to identify a network of suppliers that you can work with and hire employees to take care of the day-to-day activities as well.

Most importantly, you require capital to keep the business running and leverage business opportunities. This is where Capital Float’s Online Seller Finance comes to the rescue. If you, as a new entrepreneur, were to approach a bank or NBFC for a loan, you will be faced with difficult terms and conditions, the least of which is proving that you’ve run the business successfully for at least a year.

On the other hand, with the flexibility, ease of processing and convenience of accessing working capital even an amount as low as ₹1 lakh to as high as ₹3 crores, Online Seller Finance, specifically designed for ecommerce businesses, is the way to go.

Features 

1) Loan range from 1 lakh to 3 crores

We cater to a wide range of e-commerce merchants. Each merchant has a different capital requirement based on their business need or opportunity. With our wide ticket range, we cater to practically any working capital requirement of the online seller segment. These funds could be used for a variety of purposes such as making supplier payments, adding inventory during peak seasons or diversifying into new product categories.

2) Customized credit criteria

We acknowledge that each merchant is inherently different and must be treated individually. Unlike many traditional financial institutions, we don’t follow a cookie-cutter method to underwrite our customers. By leveraging Big Data & Analytics, we are able to underwrite each customer on the merit of their business performance and offer a tailored credit product. For example, the merchant is offered a specific loan amount basis their monthly sales on the marketplace and projected revenue.

3) Quick, online application process

We are a digital finance company and believe in limited paperwork. We offer the convenience of technology to our customers right from the start of the relationship. Borrowers can apply online using their mobile devices, as long as they are connected to the internet. The 10-minute application is very simple, quick and entirely hassle-free. The borrower can upload their documents online and need not visit a physical office for presenting the documents.

4) No pre-closure charges

Borrowers can close their loan by repaying the balance amount before the end of the agreed tenure. We offer the feature of ‘no pre-closure charges’, which means that the borrower will not be liable to pay any extra charges for closing the loan ahead of time.

5) Get up to 2x credit based on your marketplace sales

Online merchants applying for ‘Online Seller Finance’ can avail up to twice the amount of sales they make on e-commerce marketplaces. For example, if the seller makes ₹10 lakhs in sales per month, the seller can receive working capital funds of up to ₹20 lakhs. These funds can fuel growth on the marketplaces, helping the seller to increase their business geometrically. Higher the sales, the higher the eligible loan amount, higher the chances of leveraging business opportunities.

Benefits

1) Collateral-free

Our Online Seller Finance credit product is an unsecured working capital loan. The borrower need not pledge any security or asset as collateral to avail this loan. Funds are approved on the merit of the borrower’s business performance on the marketplace and not on their assets. Merchants can avail funds and operate without the anxiety of conceding their securities.

2) Funds in 3 days

Our technology and Big Data capabilities help us speed up the underwriting process. We understand that ‘timing makes all the difference’ to online merchants, given how dynamic the business is. Payments can’t be delayed and opportunities must be seized immediately. Bearing this in mind, we disburse loans to the borrower in less than 72 hours of the loan application.

3) Flexible repayment terms

Banks and other NBFCs typically function using the model of EMIs, or easy-monthly-installments. ‘Online Seller Finance’ allows you to repay the installment on a fortnightly basis. As a result, the installment is smaller in amount and is less burdensome to repay when compared to a monthly installment, which would typically be twice the sum. This way, your cash flows remain unaffected and you have more funds to deploy into your business.

4) Ideal for expanding your business

Financing the online seller segment is relatively new in the lending space. Not many financial institutions have fully understood this segment, which has caused several e-commerce sellers to return empty handed from formal lenders. Capital Float was the pioneer in digital lending to e-commerce sellers. Therefore, we’ve made it a lot easier for online merchants to avail finance for their business. Our partnerships with leading marketplaces like Amazon, PayTM, Snapdeal, Myntra, Shopclues, eBay, Craftsvilla, etc. has enabled us to reach to a wide range of sellers. Merchants on these platforms can avail easy funding and expand their business on the platform.

Eligibility and Documents

To qualify for ‘Online Seller Finance’ you must comply with the following parameters.

Eligibility

1) Applicant’s business must have minimum operational history of 1 year

2) Applicant’s partnership minimum vintage should be between 3-6 months

3) Minimum quarterly sales of ₹25,000

Documents

1) Bank statements for the last six months

2) KYC documents of the applicant and the organization

Fee 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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Implications of GST for Trading

India is amongst the fastest growing economies of the world, with retail trade contributing an estimated $600 billion+ to the economy. The impact which GST, the unified indirect tax structure introduced by the Government of India on July 1 2017, brings on such a major economic lever will be highly significant.

Further, the implications of this new taxation procedure on the trader will vary on the nature of the trade, i.e., wholesale or retail. In this blog, we explain the opportunities within the new tax reform that traders can leverage, and discuss how they can prepare themselves from a GST perspective. Read on to know the effects of this latest indirect tax reform for:

  1. Wholesalers
  2. Retailers
  3. Importers and Exporters

1. For Wholesalers:

The wholesale market is fundamental to extending the reach of goods and services to the interiors of the country, especially the rural markets. Most wholesalers operate in cash transactions because of which there is a good chance that some transactions are not accounted for, which was previously a concern but ceases to be one under GST.

Given below are the main advantages that GST brings to wholesalers.

  • Transparent tax management: The introduction of technology into the taxation system can be a blessing in disguise, an opportunity to bring about transparency in tax management. Rather than relying on cash transactions, wholesalers will now get an opportunity to go digital. They will also be able to avail the facility of input tax credit. Input tax credit is where the businessman will be able to claim tax on all input goods and/or services. For example, if a wholesaler is renting a tempo for transport of goods, going ahead they will be able to claim the tax paid on the rental and receive it as input credit. They will thus be able to reduce the final market price of the transported goods by making up for that amount.
  • Financial streamlining: Because the entire supply value chain including tax flows will be on GST records, wholesalers will be better connected to retailers and suppliers. For example, the payment for a consignment will reflect in the accounting records of the supplier company as well as the wholesaler, leaving no ambiguity about payables and receivables. This will make it easier to process payments and get tax returns in a timely manner, thereby improving the cash flows of traders. A reliable positive cash flow will help build confidence in the new regime, by making working capital available and aiding opportunities to grow the business.
  • Reorganization of supply chain: GST will enable high visibility and streamlining of the supply chain, providing wholesalers with a transparent view of supply movements. For example, taxation at the “place of supply” is already mobilizing FMCG companies establish fewer warehouses, the sizes of which will be larger than before. This will aid business efficiency in the long run. However, in the initial transition phase, many wholesalers may undergo de-stocking since they would have already paid VAT on their current stocks, and would like to avail of the input tax credit on the basis of the GST rules.
  • Ease of borrowing through digital lending: Because financial and tax transactions will now be recorded in the GST system, even small traders will have digital records of their company finances and credit status. These digital records will act as a ready reckoner of information when a trader opts for a loan. Financial institutions and online lenders like Capital Float can now easily assess the loan eligibility of small traders such as Kirana owners by accessing this data, and provide them quick and easy loans. Borrowing funds online and doing business will now be easier.

2. For Retailers:

Almost 92% of the retail sector in India is unorganised, operating in cash payments. They are, essentially, the tangible representation of FMCG multinationals to end-consumers; yet they are challenged by chronic issues such as the lack of technology enablement and low operating margins. A majority of the retail market consists of “kirana stores”, which are often the smallest link of the trade chain.

Here are the benefits of the new taxation system for retailers.

  • Input tax credit facility: As mentioned for wholesalers, retailers too would be able to claim taxes paid for input products and services availed. This will present a cost advantage to retailers. For example, under the previous tax regime, if a retailer purchases a refrigerator to store perishable goods, they were not able to claim credit for tax paid on it. Under GST, they will be able to claim the tax paid on the new refrigerator when they file their taxes. This will be possible due to tax connections reflecting in the GST value chain at each stage of the transaction. Availing input tax credit means financial gain.
  • Ease of entry into the market: The market is expected to become more business-friendly due to the clarity of processes related to procurement of raw materials and better supply logistics. This is a good opportunity for new suppliers, distributors and vendors to enter the market. The registration process has also become very clear under the GST, aiding entry into the market.
  • Retailer empowerment through information availability: Small retailers often do not have complete visibility into their stock receipts, payments, etc. and are forced to blindly rely on the word of the supplier. GST will streamline these supply and cost challenges and empower the retailer with readily available information through digital systems. For example, when different types of bills like invoices, credit and debit notes, etc. are stored digitally as proposed by GST using accounting software, these will provide retailers with real-time reports on sales, stock information and live balance sheets, in addition to performing error checks before placing an entry into ledgers.
  • Better borrowing opportunity: The retailer scope for business growth can be increased by increasing the retailers’ access to finance. This is where Fintech lenders like Capital Float step in – they can ease their passage to the new tax regime. Capital Float recognises the financial challenges these small business players face and strives to bridge this gap by financing them with small ticket loans. As “kiranas” move onto GSTN, Capital Float will be able to better serve this micro-entrepreneur segment, helping them overcome upcoming challenges by leveraging the GST-enabled digital footprint.

However, like any new reform, there are certain challenges that need to be addressed. We see that both retailers and wholesalers must manage the following eventualities of GST implementation.

!  Higher costs of input services: Input services such as manpower, legal, professional services, auditor services, travel expenses, etc. will now be taxed at 18% as against the earlier bracket of 15%, leading to higher costs to the wholesaler.

! Additional costs to upgrade technology: Many wholesalers, especially rural ones, are not technology-savvy and will need to rely on help from their supplier companies to undergo a technological transformation. This means that supplier companies may need to increase commissions for wholesalers— an added cost to the company, or wholesalers and retailers themselves will need to invest in new systems, incurring additional expenses.

3. For Importers and Exporters

According to the financial reports of 2016, India is the 16th largest export economy in the world with the net value of exports contributing to one-third of the GDP. The subsuming of various local state level taxes will have a direct impact on imports and exports, a critical component of trade. For example, the Countervailing Duty (CVD- an additional import duty levied to offset the effect of concessions or subsidies, currently 0% or 6% or 12%) and Special Additional Duty (SAD- a special kind of customs duty paid on imported goods currently at 4%) have been done away with under the new GST regime. However, Basic Customs Duty continues to be applicable and importers will need to pay it as per previous rates.

Here is a look at the overall impact of GST on trade:

  • Imports Taxation: Every import will be treated as an interstate supply, and will be subject to Integrated Goods and Services Tax (IGST) along with Basic Customs Duty (ranging between 5% and 40% depending on the good imported). This implies that IGST will be levied on any imported item, based on the value of the imported goods and any customs duty chargeable on the goods (say 10%). IGST is a combination of SGST (say 9%) and CGST (say 9%). For instance, for an import item worth Rs 10,000:
Total Duties + Taxes Payable Basic Customs Duty (10%) GST (18%) GST Cess(if applicable)
₹2800 ₹1000 ₹1800 Nil

Thus, imports taxation is an added tax liability for retailers who import goods or services.

  • Exports Taxation: Exports will be treated as zero-rated supply, i.e., no GST will be charged on exports. This is in line with the “Make in India” campaign that aims to make India a global manufacturing hub, for which exports are important.
  • Import of Services: The new clause of import of services places the onus of tax payments on the service receiver when the services are provided by a person residing outside India. This mechanism is called reverse charge and will apply in certain scenarios. For example, if the assessee has no physical presence in the taxable area, then the representative of the assesse will be required to pay tax. In the absence of representation, the assesse has to appoint a representative who will be liable to pay GST. Another example is when a registered dealer is buying goods or services from an unregistered dealer. In this case, the registered dealer will have to pay the tax on supply.
  • Need for restructuring working capital: A major shift is that GST is based on “transaction value” rather than MRP. In the old system, CVD was charged as a percentage of the MRP. Under GST, IGST will be charged as a percentage of the transaction value. This will affect the cash reserves of retailers and wholesalers, and they will need to reassess their working capital needs.

On the whole, GST is expected to bring domestic players at par with large multinational corporations due to the renewed import and export norms and the rules for FMCG suppliers. This is a good sign for Indian trade and exports in general, and thus the implementation of GST shows promise to propel India onto the international trade arena.Visit our GST blog to know more about GST and keep track of latest.

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Oct 24, 2018

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Why buying a big house is a bad investment

To take a trivial example, which of us ever sed undertakes laborious physical exercise except to obtain some advantage.

Oct 24, 2018

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What You Need to Know about the GST Impact on Pharma and Healthcare Industry?

The pharmaceutical and healthcare industry is a significant sector for the Indian economy. In terms of the volume of generic medicines produced, India is the third largest producer in the world and its rank in terms of the industry’s value stands at fourteen. The healthcare segment is expected to reach a valuation of $150 billion by the end of 2017. Like every other industry of the economy, the impact of GST is bound to be felt on the pharma industry as well.

To begin with, as different indirect taxes will be subsumed in a single tax, it will simplify the taxation system. Going further, the GST will affect the pricing, working capital, contracts with vendors, the ERP systems and internal processes in the sector.

To understand the GST impact on pharma companies, we need to be aware of the entire range of the pharmaceutical supply chain. At one end are pharma product manufacturers, contract and API manufacturers and the organisations that market the products in different parts of India. At the other end is a chain of Carrying and Forwarding Agents (C&F), distributors/wholesalers and retailers.

Two key parameters have changed in the pharma industry on account of GST. One is the manufacturing price, because many raw materials for medicines have been shifted from the 5% VAT bracket to the 12% GST bracket. Secondly, many medicinal salts and compounds have been wholly moved from 5% VAT to 12% GST rate on pharma industry. Furthermore, a number of health supplements that were earlier in the 12.5% to 15% tax bracket are now in the 18% to 28% GST bracket. The net effect of all these changes will be a significant hike in the price of medicines.

For a deeper view of the GST impact on pharma industry, we also need to consider the margins at which the complete supply chain works. In this sector, the clearing and forwarding agent has a 4% to 6% margin on the maximum retail price (MRP) of medicines, the distributor works at 7% to 8% margin on the same and the retailer has a margin of 20% on a medicine’s MRP. With the imposition of GST, the pharma companies will need to pay extra for the manufacturing cost, because the cost of raw materials has increased. Eventually, the product’s MRP will be revised to absorb the total effect.

Meanwhile, the government has also taken some steps to control and cap the price of some critical medicines, salts & compounds. This will result in a loss of 2% to 3% for the pharmaceutical manufacturing and marketing companies, who now have to bear higher costs.

From the viewpoint of wholesalers and retailers, the earning margins may not drop immediately, and supplies will be stabilised soon. The bigger concern will be the inventory held by them, on which the new GST rates will apply, although these goods were bought at the older VAT rates. In this case, the distributors and retailers will lose about 3% to 4% on their entire inventory.

Will the GST impact on healthcare industry also influence medical tourism?

By October 2015, the medical tourism sector of India was estimated to have a value of US $3 billion. It was projected to grow to $7-$8 billion by 2020. A number of studies have shown that the cost of healthcare services in India combined with the travelling and accommodation costs is around 30% to 40% lesser than similar medical procedures in first world countries such as the US, Canada, Australia and most Western European countries. The boom in India’s medical tourism has helped to generate more returns for the healthcare industry.

The overall impact of GST on healthcare and medical tourism industry will be a mix of positives and negatives. The diagnostic services have not been burdened by the tax. There is also no tax on medical devices like hearing aids. However, a 5% GST rate has been applied on vaccines, cardiac stents, diagnostic test kits and dialysis equipment. The rate of GST for X-ray tubes, radiotherapy apparatus and surgical instruments will be 12% and for high-end medical equipment, an 18% tax rate will be applied. While patients located in India may end up paying a higher cost for some products and services, the medical tourism industry is expected to grow, as the comparative costs in a few other countries still give an advantage to India.

Yoga, meditation centres and organic living practices in India also attract tourists from other parts of the world. The country is a home to a myriad of alternative practices like Homeopathy, Ayurveda, Siddha and Acupuncture, which are popular among medical tourists. These give an edge to India over Asian countries like UAE, Oman, Singapore, Malaysia and Thailand. However, the GST rate on Ayurvedic products has been raised to 12%. It attracted a levy of only about 5% in the pre-GST regime. This may impact the price of natural medicine products if the manufacturers decide to pass on the burden to customers. Visits to yoga classes will also be expensive, as it is yet another segment that has become taxable under GST.

Overall, the GST impact on healthcare and pharma industry is not fully established. The obvious benefit will be by way of reduced complexities and the consolidation of multiple taxes into a single rate. The negative impacts will be felt in the form of increased prices for customers and reduced margins for businesses in the supply chain. The GST Council is still deliberating over some reforms to alleviate the burden on the people affected.

Capital Float has been taking note of the changing conditions post the implementation of Goods and Services Tax on 01 July 2017. With the aim of promoting entrepreneurship in India, we maintain our convenient lending services to businesses in all the industries including the pharmaceutical and healthcare sector. We support the Make in India initiative and only happy to answer any query that you may have on the finance product that suits your business, loan interest rates and terms.

Oct 24, 2018