SMEs are sometimes cash-crunched to provide credit to their customers. These customers often ask for 30-60-90 day credit after raising an invoice. Due to the absence of negotiating power, SMEs are often arm-twisted into accepting delays in payment. The gap in cash flows resulting from delayed receipts affects the performance of a company and its ability to run smoothly.
Such situations can now be easily avoided by using Supply Chain Finance, which allows a business to raise the necessary funds by using its receivables. Read on to know more about how supply chain financing can be a powerful tool for boosting the cash flows of your business.
When is Supply Chain Invoicing Needed?
Businesses offer a credit period to customers after executing an order and raising an invoice, since this helps them establish a stronger relationship with customers, build customer loyalty and receive recurring orders. While on one hand, SMEs need to deal with delayed payments from clients, they do not have the negotiating power to delay payments to their suppliers. Moreover, they need funds to make overhead payments and provide salaries to their employees. Even the most profitable SMEs may face cash crunches due to the time lag between having to incur expenses and actually receiving payments from clients.
If not fulfilled in time, this shortage of funds can weaken the smooth functioning of the business. This is where supply chain invoicing for small businesses comes to the rescue. The invoices are like an asset for a business, and can be used to overcome cash flow issues. Supply chain invoicing uses the accounts receivables of a business as a means to increase liquidity.
Invoice Factoring Versus Supply Chain Invoicing
There are two ways in which a business can use its invoices to infuse cash into its operations: invoice factoring and supply chain invoicing. With invoice factoring, a business sells its outstanding invoices, often at a significant discount, to a third party. Supply chain invoicing allows a business to use its outstanding invoices as collateral to secure a loan. Often businesses do not prefer invoice factoring since they do not like the idea of a third party contacting their clients to recover an invoice. This can have a bad impact on the relationship between an SME and its customers.
Supply Chain Invoicing for Small Business
If a small business has outstanding invoices, it can use these to inject cash into its operations. Capital Float’s Supply Chain Finance product does exactly that. The best news is that the benefits do not end there.
Fast Loans: For any business, especially an SME, timing of receiving funds is critical. Using cutting-edge technology, FinTech companies like Capital Float are able to meet the most urgent working capital needs of small businesses. In fact, the Supply Chain Finance product uses data-driven criteria to approve a loan within hours and disburse the sanctioned funds within just three days.
Convenient Application: One does not need to visit a financial institution and stand in any queues to apply for supply chain invoicing from a FinTech lender. One can apply online, at any time and from anywhere. With such options available, an SME can say goodbye to the hassles of obtaining a loan from a traditional bank. The application process for Supply Chain Finance is so smooth and easy that one can complete the application form even while traveling from home to the workplace. What’s more, Capital Float has a mobile app that makes the application process even easier. The complete process involves filling up a form and uploading the required documents, which takes less than ten minutes.
High Loan Amounts: An SME can receive as much as ₹1 crore to inject into its business. From as low as ₹1 lakh to as high as ₹1 crore can be secured to be used as working capital or to fund the growth of a business. An SME can borrow as much as 90% of the value of the outstanding invoices. One can use the supply chain finance calculator to get an idea of the amount the business can borrow.
Flexible Loan Tenure: With Supply Chain Finance, one can have a repayment plan between 30 – 180 days. The greatest feature is the one time bullet repayment option, which allows a business to repay the loan in one go, thus reducing the interest burden. Else, the business can repay the loan in easy monthly instalments.
Minimum Documentation: In order to Apply for Supply Chain Finance, a business would need digital copies of only a few documents. These include audited financials for the past couple of years, VAT returns and bank documents for the past six months, KYC documents of the business owner and the SME, invoices for the last three months and sales ledger for the last six months.
Do you raise invoices and then need to wait weeks or months for clients to pay? Did you know your cash requirements could be met with supply chain financing?
Now a business can secure the required financing without pledging any assets. The invoices are all that a business needs to infuse cash immediately into its operations. Revolutionary products like Capital Float’s Supply Chain Finance have helped solve the cash flow problems of many businesses. Moreover, being technology driven, there is complete transparency in the fees for this service. There are no hidden costs in acquiring this loan product.
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MSME is an important sector for the Government, as it maintains a relentless focus on increasing GDP and employment. Formalization of MSME businesses is being undertaken on a massive scale after demonetization and the introduction of GST. The core focus of the Union Budget 2018 indicates the Government’s commitment to continue strengthening MSMEs from the base of the sector.
Lending a Hand to MSMEs
With the Union Budget 2018-19 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. The Government has set a target of ₹3,00,000 crores for loans to be provided under MUDRA in 2018-19. Specific measures to address NPAs of MSMEs were promised to ease the cash flow challenges that they face. The tax burden on MSMEs has been reduced by axing tax rate to 25% for those with revenues of below ₹250 crores. Recapitalization of PSU banks will add an additional ₹5,00,000 crores to the available lending pool this year. A unique Aadhaar-like identity for each enterprise is planned for streamlining business identity. This measure can enable Fintech lenders to process eKYC of enterprises swiftly and offer working capital finance in a matter of minutes. Furthermore, the Finance Minister Arun Jaitley called out Fintech lenders in his speech and emphasised their importance in financing the development of MSMEs in India.
A five-year tax holiday was granted to Farmer Producer Organisations (FPO) with a turnover below ₹100 crores to encourage post-harvest value addition. The Government has also promised a Minimum Support Price (MSP) crop of 1.5 times the production cost to farmers. In addition, several proposed measures related to the farm sector include – funds to develop agricultural markets, improve agricultural logistics, enhance rural connectivity, and distribute Kisan credit cards to farmers in fisheries and animal husbandry sectors. This sets the precedent for these sectors to create a digital footprint, facilitating them to receiving customized finance in the future from digital lenders like Capital Float.
The Finance Minister proposed to extend the tax relaxation period to 150 days to footwear and leather industry to boost the creation of employment at the grassroots level. An additional ₹10,000 crores have been allocated for fisheries, animal husbandry and aquaculture industries. This is expected to aid more micro-segments in being included in the formal financial ecosystem
New Financing Avenues
In a bid to help start-ups and venture capital firms to attract foreign investments in niche areas, the Government will evolve a coherent and integrated policy for ODI (Outward Direct Investment) and hybrid instruments. The basket of eligible FDI instruments will be expanded to include these under certain conditions.
Taking a Position on Crypto Assets
The Government has reiterated that it is illegal to transact using cryptocurrencies, though it does not categorically state that it is illegal to hold these assets. The Government will intensify its efforts to eliminate illicit transactions in cryptocurrencies. It also proposes to explore the use of Blockchain technology to enable more transparent payment mechanisms to boost the digital economy further. These efforts certainly forward the shift of business transactions from being paper-based to paperless, while adding clarity on which methods of digital payment are acceptable and which aren’t.
MSME – Key to India’s Industrial Growth
MSME sector plays a key role in India’s journey towards becoming the 5th largest economy in the world. Several measures to ease cash flow have been proposed which are likely to make lending more readily available to MSMEs. With Fintech lenders leading the charge on the financing front, MSMEs can be expectant to receive timely credit support to actualize their business ambitions and achieve remarkable growth this year. Several micro-segments are also expected to be absorbed into the formal financial system, as Fintech lenders like Capital Float continue to champion for the cause of financial inclusion in India.
Oct 24, 2018
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.
Oct 24, 2018