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.
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E-commerce in India is growing at a rapid pace. It’s a highly competitive space as it gives opportunities to thousands of small sellers as well as big brands. However, to compete with the larger players, several sellers face the challenge of sufficient capital.
Be it in day-to-day operations, meeting sudden demand rise or to build a brand value, capital is all that you need to keep your venture growing. Loans are one of the most convenient financing options available for most online sellers. This is to expand their business and to manage gaps in cash flow. Be it a big brand or a small seller, financial backing is much needed to grow on e-commerce platforms.
Leading e-commerce companies have tie-ups with many financial institutions such as banks and NBFCs. These partnerships help encourage sellers on e-commerce platforms by providing them finance, mainly in the form of working capital.
Many financial institutions are working in collaboration with e-commerce companies. They have rolled out financing schemes for their online merchants and sellers. Lenders collect the database of sellers from the partnered e-commerce company. They then determine the quantum of loan and the interest rate for the potential borrower. Usually, loan amount varies from Rs 1 lakh to 100 lakhs.
Some lenders offer higher loan amounts depending on the pattern of the business. These e-commerce loans are offered to online sellers at a competitive rate with flexible repayment tenures.
Interest rate offered varies from 11% to 15 %, depending on the various factors and business record of the seller. It involves a quick and easy application process and minimum documentation.
E-commerce loans can be applied online through a simple process of form filling. Approvals are instant in most of the cases. Seller should be registered with the respective e-commerce company to avail the financing scheme. Usually, e-commerce loans are unsecured loans, i.e. loans without any collateral.
Lenders focus on many records related to the seller. Here are some of the Influencing factors based on which lenders determine the quantum of e-commerce loan:
1) Cash Flow Management:
When you are selling products online, it’s important to ensure healthy cash flows. Online sales are quite difficult to predict, especially during the festive season and on big sale days. Failure in your marketing strategy can leave you with a lot of inventory that you could not sell. Seasonalities are common in the online selling business. You may end up facing cash flow problems, which ultimately lead to a financial crunch. Effective management of cash flows is a vital element. Lenders take your cash flow forecast statements into consideration while determining the loan limit.
2) Past Record:
Lenders take into consideration the entire business record of the seller since inception of the enterprise. Some of the documents taken into consideration are:
- Business license,
- Incorporation or registration details
- Timely payment of sales tax etc.
The lender will then check your business plan and the performance since inception. They do this to understand the pattern and size of your business. So, be mindful of maintaining a good business record right from the onset.
It’s important for online business owners to keep their records updated. With good records, you may get a preferential rate on credit.
3) Operational History:
Numbers of years in business counts more in getting the e-commerce loan approved. Generally, most of the financial institutions provide e-commerce loan to online sellers with more than a year of operation. The biggest fear for lenders when providing loans to online sellers is the possibility of default. Hence, stability of business is taken into consideration. Your entrepreneurial experience plays a major role in getting a credit facility for your online business.
4) Return on Sales:
The efficiency of your business is measured basis the return on sales. Lenders consider the ratio of profit and sales to determine the credit limit that they can offer. The loan amount is determined by lenders based on your sales records of the last six months.
5) Type of Business:
A lender decides the percentage of finance that they can offer to an online seller. It depends on the type of business. If your business is fast moving and the frequency of buying such products is more, you are likely to get higher loan.
6) Customer Satisfaction and Review:
Earning customer loyalty and trust is key to being successful in online selling. The first impression of a seller needs to be good for customers to consider purchasing from the seller. Positive customer feedback will ultimately lead to more business. This creates more demand in the online marketplace. Customer review and rating defines your service quality. This helps you in building brand loyalty on the e-commerce platform. High customer satisfaction will ultimately boost your sales. This creates competitive advantage for you in the online marketplace. Lenders consider these elements to evaluate the level of your service quality.
With many e-commerce companies collaborating with financiers, availing credit for online businesses is no longer a challenging task. As lenders partner with e-commerce companies to offer customized finance solutions to e-sellers, more opportunities are available for new entrepreneurs to explore the online selling business.
Raising working capital for an online business is now convenient. It has become easy with the financial assistance from e-commerce companies.
With the help of details like:
- Cash flow forecast,
- Number of years of business experience,
- Sales volume
- Customer satisfaction report, etc.
Financial institutions are able to underwrite e-commerce loans for online sellers.
Oct 24, 2018
As the past couple of years witnessed a drop in data costs, WhatsApp has successfully replaced the traditional offline messaging service as the primary mode of text communication in India. Leveraging this fact, this messaging platform launched WhatsApp Business – the pilot for a dedicated mobile app exclusively for businesses – in early September 2017.
Since its launch, popular brands in India such as BookMyShow and MakeMyTrip have been using this Facebook-owned WhatsApp business strategy to connect with their target audience. Though there are many apps that cater to business users, a messaging platform like WhatsApp provides a wider scope for a larger number of businesses, be it the local grocery store, professional services, medical institutions and even the government.
- FREE OF COST
You read right! WhatsApp Business lets you list your business and contact your customers at absolutely no cost. With a popular messaging app enabling business owners to send service messages for free, this could mean a gradual decrease for the conventional, but costly SMS facility. This WhatsApp business plan also counters the need for SMEs to create a mobile presence by designing smartphone apps, a distinct advantage for young enterprises from a cost and complexity perspective.
- DESCRIPTIVE BUSINESS PROFILES
If you own a small business without a website, WhatsApp Business allows you to describe your business in detail, and you can fill in addresses, contact numbers, social media links, etc. that lets your clients know more about the nature of your operations. The app takes verification seriously; a green tick appears against the name of your business when WhatsApp Business has corroborated the details you had provided.
- MULTIPLE MESSAGING OPTIONS
This unique feature of customized reply settings on WhatsApp Business ensures that you are customer-ready at all times. The ‘Quick reply’ option lets you set up standard responses to frequently asked questions. To all new leads who get in touch with you, the ‘Greeting message’ can introduce your business and what makes you different. You can also frame a custom ‘Away message’ for communications during off hours or when the small business owners are busy.
- BUSINESS ANALYTICS
More communication also means more data, which can be leveraged to understand your customers better. WhatsApp Business offers messaging statistics, a feature that provides metrics on the number of messages that were sent, delivered and read. Using this information, you can analyze the frequency of response from your leads or customers, modify the content of quick replies and experiment on the strategy of communicating with them.
- WHATSAPP WEB SERVICES
WhatsApp Business supports its projection via WhatsApp Web, which lets you manage the service through your computer without the mobile app. It provides additional efficiency when interacting with clients and partners, and leaves automation possibilities open as the system grows.
Setting up WhatsApp Business
WhatsApp Business in India is present only on the Play Store; so you will need an Android smartphone to use the app. As every WhatsApp account can be linked to unique mobile numbers, you register on this WhatsApp for business by using your official business number or your office landline.
Keep these ready before you set up the WhatsApp Business app, the steps for which are given below:
1. Backup your chat data to cloud storage if you already have a number which is primarily used for business with WhatsApp. Click on Chats>>Chat Backup>>Backup to upload to the cloud.
2. Download the app from the Google Play Store, install it and then launch it by tapping on the new WhatsApp Business icon.
3. Enter your business phone number that will be used to communicate to your customers, and verify it using the SMS (for mobile phones) or ‘call me’ option (for landlines).
4. Restore the previous chat related to the number once verification is complete (from Step 1).
5. Fill the name of your business and from the chat section, tap on the menu button and head to Settings>> Business settings>> Profile. Here, you can fill in all the details that you want to share with your customers.
What’s in it for small businesses?
WhatsApp Business is extended only to small businesses, an exclusivity that budding entrepreneurs can use to their advantage. The WhatsApp for business marketing aims at streamlining and extending the reach of small businesses without making hefty investments in website development, mobile app creation, customer support, and more.
Moreover, it helps notch up the idea of personalized marketing, as you can use the app to share images of products and promotions periodically to your loyal band of customers. The WhatsApp Business app also offers credibility to small businesses – a green tick against the name of your enterprise verifies the genuineness of your services and operations, an aspect that will help a majority of SMEs to reach out to a wider audience.
There are nearly 230 million WhatsApp users in India, and the fact that everyone knows how to use this WhatsApp for business use eliminates the time required to learn the nuances of a mobile application for businesses. Thus, WhatsApp Business is a ground-breaking solution to the communication and marketing needs of small businesses. We expect the introduction of WhatsApp Payments to act as a catalyst for this business with WhatsApp option to implement artificial intelligence, data analytics and voice recognition technology to optimize it into a powerful sales and marketing channel for small businesses.
Oct 24, 2018
The world is not what it used to be since the Coronavirus outbreak. The virus has distorted the daily lives of millions of people across the globe. Social distancing, travel restrictions, work from home – are becoming the new normal. To gain customers’ trust, companies should understand the buyers and their requirements in this unprecedented environment.
Why is maintaining customer relations essential?
Good customer relationships can help a company to grow. As with personal relationships, creating and nurturing customer relationships is essential as well. When organizations develop strong customer relationships, it can lead to loyal customers, positive word of mouth, and higher sales.
What are the customers expecting from you?
For your company’s long-term well-being, you should put the needs of your customers first. Customers will always prioritize their safety and that of their families. They expect businesses to understand their shopping style, keep essentials well-stocked, be treated as a valued customer, and get benefits even in these hard times.
How to maintain customer relations in the pandemic?
- Maintain hygiene: The safety of the customers should be the priority of any business concern. Therefore, businesses should keep their stores thoroughly sanitized. When a customer goes to the store, there should be provisions for social distancing and contactless operations to reduce the risk of contracting the virus.
- Communicate with the customers: In the wake of the pandemic, everyone is in distress and fear. In such times, if a company can keep communicating with its customers, they will feel considered and cared for. By maintaining contact with its customers, the company can also stay informed about the customers’ needs and wants through feedback, thereby stocking inventory accordingly.
- Make them feel special and valued: By storing customer information such as important dates, companies can surprise their customers with gift vouchers, coupons, gift hampers for special occasions such as birthdays and anniversaries. They can even send over medicines for the aged family members of the customers. Such little things can increase customer loyalty.
- Understand what customers are looking for: Businesses can identify the needs and wants of its customers through research and surveys.
- Added benefits: In these hard times, companies can give their customers free masks and sanitizers with the items they purchase.
It is important for a company to bear in mind the immediate needs of its customers during the Coronavirus crisis. By maintaining strong customer relationships, companies can ensure sustainability and brand loyalty while running their businesses in these challenging times.
Oct 24, 2018