The inability to provide collateral has been a major hindrance for small and medium enterprises (SMEs) seeking loans to fund their working capital needs, finance their expansion or take advantage of growth opportunities. Although the government has been taking steps to provide the necessary financing to SMEs, traditional lending institutions offer generic credit products to SMEs. When these financial institutions offer collateral free business loans, they impose stringent eligibility criteria, have long loan approval processes and the requirement of a guarantor to safeguard themselves against default.
Against this backdrop of skepticism, new-age lenders like Capital Float have emerged, using cutting-edge technology and innovative products to ease the loan approval process and support SMEs to repay loans by tying repayments with their receivables. These FinTech companies, which bring together finance and technology, specialize in business loans in India for the SME segment.
Specialized Products from FinTech Lenders
FinTech lenders aim at fulfilling the credit requirements of Indian SMEs by developing innovative and customized loan products and simplifying the process of loan application.
Realizing that the main problem faced by SMEs in securing loans is their inability to provide collateral, Capital Float offers flexible, collateral-free business loans via its online platform. These loans can be used to purchase inventory, optimize cash flows or fund any other expense. Some of these loans are provided against the borrower’s bills receivables or credit card receivables. All of Capital Float’s credit products come with easy and flexible repayment options.
Choosing the Collateral Free Loan that Best Suits Your Business
For any business loan requirement, one needs to assess the amount needed and submit an online application, along with digital copies of relevant documents. These documents may include income tax returns for a period of three years and bank statements for the last six months. The use of advanced software, with highly powerful algorithms, allows Capital Float to process the loan application and transfer the sanctioned amount to the SME in a matter of 3 days.
Small businesses can explore a variety of loan options and choose the one that best suits their business loan requirements. Here are the things one needs to consider:
If your SME has positive monthly cash flows and needs funds for the short term, you can apply for Capital Float’s Term Finance product. One can borrow an amount ranging between ₹1 lakh to ₹1 crore, with the loan period ranging from six months to three years. Term Finance loans are disbursed within three days.
The growing popularity of online shopping has propelled the growth of ecommerce companies offering a variety of products and services. On the other hand, increasing awareness of customers, shrinking lead times and the need to manage inventory effectively have posed new challenges for SMEs. Here’s where the Online Seller Finance product works best. This innovative credit option is a short-term loan provided to e-commerce sellers who are selling their products on online platforms. These companies may be looking to raise funds for purchasing stock, diversifying their operations or taking initiatives to increase the visibility of their products. Partnerships with online marketplaces, like Amazon, PayTM, Snapdeal, Myntra, Shopclues and eBay allow Capital Float to help merchants access fast and flexible working capital funding. The loan amount is decided on the basis of the monthly sales and projected revenues of the borrower. Flexible repayment options and the availability of credit of up to two times the monthly sales of the business are some of the attractive features of Online Seller Finance.
Another attractive short-term collateral free loan option is the Pay Later Finance, which works like a revolving credit facility. A credit capacity is determined, based on the prospects of the business. The total amount is not transferred in one go. The SME has the flexibility to borrow amounts as and when business loan requirements arise. The loan amounts can be repaid over a 30-60-90 day cycle. The repayment restores the sanctioned limit, making more credit available for future requirements. Interest is charged only on the amount drawn and not on the entire credit capacity.
Businesses that receive payments via credit card transactions or point of sale (POS) machines can opt for a special financial product known as Merchant Cash Advance. Partnerships with multiple POS machine vendors such as Pine Labs, Mswipe, ICICI Merchant Services, MRL Posnet and Bijlipay have enabled Capital Float to offer swift and hassle-free business loans in India to SMEs using POS machines at their establishments. This tailor-made financial product offers loan amounts of up to 200% of the borrower’s monthly card settlement. The tenure ranges from six months to a year, and a business can raise as much as ₹1 crore.
SMEs also have the option of using their accounts receivables to raise business loans at attractive rates. With the Supply Chain Finance product, an SME can liquidate its receivables immediately into cash and use the same to fund the execution of the order or the growth and expansion of the business. A company can borrow funds ranging from as low as ₹1 lakh to as high as ₹1 crore. One also has the option to repay the loan in easy instalments or in one go in case funds become available to the business.
For SMEs seeking collateral free business loans with quick approvals and disbursal of funds, Fintech lenders are a viable option. The priority for such lenders is to not only ease the process of application and disbursement, but also help SMEs repay loans easily and continue to have credit available.
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Capital Float, the largest digital lender in India, has partnered with Payworld to provide kirana store owners with convenient financing options, enabling them to expand business operations. Small retailers are often underserved by traditional financial institutions because of their limited credit history. These retailers can now avail hassle-free working capital from Capital Float, which will help them manage inventory and cash flows with added scalability.
There are more than 12 million small retailers in India. Many of these businessmen put decision-making on hold because of traditional credit barriers. Through this partnership, Capital Float will provide small retailers with collateral-free loans, which will help to exponentially increase their capacity to do business on the Payworld platform. Once the loan is approved, the retailer can request for funds using the Capital Float mobile app and the funds are disbursed within 10 minutes.
“Due to the lack of established lending norms and consequent delay in financing activity, existing and new players in the retail space have lesser access to credit, which affects their growth and expansion plans”, said Gaurav Hinduja, Co-Founder, Capital Float. “With Payworld, we have simplified the lending process so that neighbourhood kirana stores are able to fulfil their financial needs and better service their customers,” he added.
With India becoming digital, Payworld helps customers in remote locations with limited access to electronic payment methods, perform daily transactions like booking bus tickets or paying mobile bills via Payworld’s network of retail points, which includes kirana stores. A proprietary algorithm developed by Capital Float uses non-traditional, surrogate data sources, including each retailer’s performance on the Payworld platform, to build a personalized credit profile and provide customized finance options to the retailer. In the long term, this will also develop an official credit profile for these retailers, thereby increasing their chances of availing credit products from traditional financiers.
“In keeping with our business philosophy of ‘Making Life Simple’, we have partnered with Capital Float to provide the retailers in our network the support they require to boost their business. This is critical in building retailer loyalty to our platform, giving them the confidence to increase the number of transactions, positively impacting revenues for them and us” said Praveen Dhabhai, COO , Payworld.
Click here to read the full press release on The Economic Times
Oct 24, 2018
SMEs play a crucial role in the economic development of India. They contribute to 45% of the industrial output, 40% of the exports and 42% of the employment in the country. Although these enterprises are highly significant to the economy, they are regularly challenged by policies, laws and processes In recognition of this, the Union Budget 2017 gave start-ups and SMEs a lot to cheer about.
Increasing Financial Viability with a Lower Tax Burden
Finance Minister Arun Jaitley announced a reduction in corporate tax from 30% to 25% for SMEs with an annual turnover of less than ₹50 crores. Moreover, the presumptive tax rate for SMEs with an annual turnover of up to ₹2 crores has been lowered from 8% to 6%. Both these measures would increase the bottom-line of SMEs. These enterprises work on low profits, and their survival is often threatened by even minor fluctuations in the business. The enhanced financial viability would increase the survival rate of SMEs.
At the same time, Budget 2017 has tried to align with the broader objective of increased digitalization. The proposed reduction in presumptive tax is applicable only for a firm’s gross receipts that are received via digital transactions. Also, no cash transaction above ₹3 lakhs would be permitted going forward. Both these measures have been designed to increase transparency and widen the tax base through digitalization.
Much Needed Breaks
Start-ups need maximum support during their initial years. From the next fiscal year, start-ups would have to pay taxes for only three out of seven years, up from last year’s exemption limit of five years, if they recorded profits. This is a great opportunity for start-ups and the economy. While a huge percentage of start-ups fail, these enterprises are responsible for introducing the most innovative products and services. The tax break announced by the Finance Minister would give start-ups a better fighting chance of survival and encourage more innovative ideas to be executed well.
Loans, Financing & Funding
The Finance Minister doubled the lending target to ₹2.44 lakh crores for the next fiscal year, making more credit available to small businesses to finance their working capital needs. Prime Minister Narendra Modi had already announced, on December 31, an increase in government credit guarantees for SMEs from ₹1 crore to ₹2 crores.
The FIPB (Foreign Investment Promotion Board) is to be abolished in the upcoming fiscal year. This would significantly liberalize policy related to FDI (Foreign Direct Investment). This is expected to boost retail and ecommerce in the country. Mr. Jaitley mentioned that further FDI relaxations were under consideration.
Most traditional banks are unwilling to give loans to SMEs due to the fear of defaults. Tax concession on provisions for non-performing assets (NPAs) and capital infusion of ₹10,000 crores for state-owned lenders would make loans more accessible to SMEs.
To encourage more investments into start-ups, the condition of continuous holding of 51% voting rights has been relaxed for carrying forward of losses by start-ups, provided the founder remains invested in the business.
Building on Digital India
While saying the almost 125 lakh people had adopted the BHIM digital payment app, the Finance Minister announced two new schemes – cashback for merchants and referral bonus for individuals.
Aadhaar Pay, the merchant version of the Aadhaar Enabled Payment System (AEPS), is to be launched shortly. This app would enable consumers to make payments without using cards, e-wallets or even mobile phones, since the merchant’s device would be linked to an Aadhaar biometric reader. More than a billion people in India already have Aadhaar cards, and this system would make most financial transactions simple, fast and traceable. It would be a boon for raising loans, enabling fintech lenders to link repayment to payments received by the SME.
The government would be targeting ₹2500 crore digital transactions in FY18 through BHIM, Aadhaar Pay, IMPS and debit cards. The Finance Minister indicated that banks would have to introduce 10 lakh new point-of-sale (PoS) terminals by March and 20 lakh Aadhaar-based PoS terminals by September, allowing more digital transactions, which would enhance financial inclusion and transparency.
For the upcoming fiscal year, the Finance Minister announced a step-up in the total allocation for infrastructure development to an all-time high of ₹3.96 lakh crores, including increased allocations for railways, road and shipping. Infrastructural development eases a huge bottleneck faced by SMEs in transporting their goods to other regions in a timely and cost-effective manner. Better infrastructure would give confidence to SMEs to expand their markets farther and reduce wastage and spoilage during transportation.
Moreover, the roll out of GST (Goods and Services Tax), which the Finance Minister indicated was tracking as planned, would further increase the ease of doing business in other states.
An allocation of ₹10,000 crores towards the Bharat Net project was announced. This would increase access to high-speed broadband across India, facilitating communication and allowing SMEs to reach out to clients located in various corners of the country in a cost-efficient way. The geographic scale achieved will help SMEs to break physical boundaries and leverage bigger opportunities for growth.
The latest Union Budget comes as a respite for start-ups and SMEs. The strengthening of these businesses would play a critical role in India’s transition to becoming an economic superpower.
Oct 24, 2018
In today’s world, saving money is of the utmost importance. If you are stressed about how to save money, then you are not the only one in this regard. Financial planning sounds easier than to practice. Even though it may be more exciting to spend money, you should try to practice saving for contingencies, as the future cannot be predicted and is uncertain.
Why is saving money essential?
Saving money can help you to become financially independent, providing you with security in the face of emergencies. Financial planning is necessary to set aside money for the family’s needs, such as the education of children, marriage expenses, healthcare expenses, planning for significant life events, retirement, etc. Saving money is an effective financial practice and a lifestyle choice with several proven benefits.
7 tips to save money
Though there are several ways to save money, you could consider implementing these seven tips:
- Awareness: Being aware is one of the most critical factors. If you are aware of your finances and spending habits, you will be able to consciously set more money aside.
- Prepare a budget: Begin by identifying your fixed and flexible expenses. This will help you evaluate how much of your corpus is depleted by unnecessary expenditure. After this, you can prepare a budget on a weekly or monthly basis by setting expenditure limits. This will help you pay your bills while simultaneously creating a pool of savings. You can make a budget on a weekly or monthly basis (based on your preference) with spending limits clearly defined. This budget may help you in saving extra money and restricting unnecessary expenditures.
- Curb the spendthrift in you: Many people aren’t always conscious of how lavishly they spend money on unimportant things. Tracking expenses will help you maintain a close vigil on expenses and keep the spendthrift within under control.
- Create an emergency fund: While facing emergencies, financial support in the form of insurance or loans may not be immediately available or they may not cover the need of the hour. At such times, savings come in handy to address the contingency. Therefore, make sure you set aside a fund for unforeseen expenses.
- Sell things you no longer use: There are many things we buy, and after some time, do not use any more. These items can be sold to generate funds.
- Savings calculator: Various types of savings calculators can be found online. These can be used to calculate the amount one can save over a given period of time. Using these calculators could encourage the habit of saving.
- Switch to a personal finance money management app: Spends tracking and budgeting can be made easy with personal finance management apps. Walnut is one of the most loved and rated apps in the market with over 10 million downloads. Use this app to unlock the financial planner in you.
It is necessary to save money, as it provides security, financial independence, and reduces stress. Get started on your journey of personal financial planning to achieve peace of mind and money in the bank for when you need it.
Oct 24, 2018