5 Big Reasons to Opt for a Merchant Cash Advance Loan

While dining at a restaurant, customers either settle the bill through cash or by using a credit or debit card. Similarly, online shopping also offers the advantage of choice of paying by cash or card. In both cases, apart from offering quality service and/or products, the customer experience is further enhanced when a merchant offers the convenience of choice. Keeping customer satisfaction in mind, the use of card payment devices has become a norm for modern-day businesses. After all, a business’ success largely depends on how happy its customers are. A well-run business attracts more customers and eventually ensures long-term gains. These include better profit margins, wider customer base, higher brand value, etc.

One of the key factors that makes all this possible for a business, regardless of its size, is working capital. A travel agency runs very differently from, let’s say, a flourishing B2B business. However, the need for access to quick finance is something they have in common. Given that swiping of credit or debit cards is fast becoming commonplace, businesses are waking up to the fact that they can utilize point-of-sale card machines to their advantage. In other words, they can use the cash flowing into their merchant account from card swipes to avail of merchant credit advance.

Merchant cash advance companies ensure a quicker and easy access to money. Turning to a conventional lender for working capital needs is not always possible for a small business, nor in most cases is it simple. This swings the spotlight on merchant cash advance loans. A tailor-made financial product, Capital Float’s merchant cash advance option has benefited several Small and Medium Enterprises (SMEs).

Our association with several point-of-sale card machine vendors like Mswipe, ICICI Merchant Services, Pine Labs, Bijlipay and MRL Posnet enables a wide range of merchants to obtain customized working capital solutions from us in the form of a merchant cash advance loan.

Approaching merchant cash advance companies like Capital Float makes sound sense for SMEs in search of quick access to funds. Here are 5 important reasons why SMEs should opt for merchant cash advance loans over other types.

1- Broader loan range: Capital Float’s merchant cash advance loan offers SMEs the flexibility of choosing the exact amount of capital they need. Addressing credit requirements ranging from as low as Rs. 1 lakh to as high as Rs. 3 crores, this is a customized financing option based on the monthly card settlement of a business. A merchant credit advance loan is an ideal solution for those who have consistent card inflows as well as short-term investment requirements.

2- Flexible loan tenure:  Apart from offering the advantage of cashless transactions, point-of-sale machines can help speed up access to working capital. Capital Float’s merchant cash advance loan, based on card swipes comes with the benefit of flexible loan tenure. SMEs can opt for a 6-month or 12-month repayment term, making it easier to pay back the loan at their convenience.

Besides, payment to the merchant cash advance company varies directly with the merchant’s sales volumes. This means SMEs have the option of paying less during a low season. Additionally, with this innovative alternative, they need not pay monthly EMIs which are the norm in traditional small business loans; they can pay weekly or fortnightly installments too.

3-Get up to 200% of your monthly card settlement: Merchant credit advance loans work like a charm for retail businesses as well as restaurateurs. Given the high extent of card swipes in today’s digitized and connected world, one can receive financing up to 200% of monthly sales from card payment machines. Higher card swipes can mean a higher loan amount.

4- Apply anytime, anywhere: Typically, loan applications are a laborious process requiring several trips to the bank. But alternative financing options like merchant credit advance are anything but that. In fact, merchant cash advance companies offer a quick and hassle-free online application process, with forms that can be filled and uploaded anytime, from anywhere. The entire process of filling out an application form and submitting the required documents takes just 10 minutes. It is time to bid adieu to lengthy procedures and paperwork required for a conventional loan.

What’s more, at Capital Float we understand the value of quick access to credit. Meeting an unexpected business expense or leveraging a lucrative business opportunity can be a challenge for well-managed businesses. Utilizing innovative technology for speeding up loan approvals, Capital Float disburses merchant cash advance loans within 72 hours.

5. Simple pre-requisites: Merchant credit advance is something SMEs can easily apply and avail of. The prerequisites are simple and include the following qualifiers:

  • Operational history of one year
  • Minimum turnover of Rs 20,00,000
  • Card acceptance vintage of six months
  • Minimum monthly card volume of Rs 1,00,000
  • Minimum of six settlements per month

Personalized and transparent

Capital Float fully comprehends the fact that loan products need to be customized according to the needs of a business. Therefore, going for a financing option like merchant cash advance loan makes sound sense. SMEs receive exactly what they are looking for in terms of working capital; and the merchant credit advance is convenient in terms of repayment.

Capital Float believes in conducting business in a transparent manner; we do not levy any kind of hidden charge whatsoever. There is no pre-closure penalty either — another advantage in the merchant cash advance loan. The borrower is only obligated to pay a processing fee of up to 2% of the loan.

Capital Float aims to remove financial barriers that stand between SMEs and growth by providing easy access to capital.  Our merchant cash advance loans are a simple and secure means to bridge the credit gap that small businesses routinely face.

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Bharat QR vs POS Machine: Which One Is Better?

FinTech is disrupting the very fundamentals of money management the world over, and India is no exception. With the Prime Minister’s focus, especially, on making India “digital”, a number of programs and schemes have been launched. In fact, many of the schemes have taken a cue from the private sector and have upped the innovation game to deliver a comfortable and convenient money management experience. From the point of sale (POS) machines to merchant cash advance to e-wallets, we are seeing a plethora of FinTech products and services change the way we pay. And this phenomenon is occurring across industries, whether it is the fast moving e-commerce sector or the heavy-duty manufacturing sector.

Consumers are at the receiving end of these changes and need to fast adapt to the new payment means. First it was a revolution of the plastic money, with cash bring replaced by credit and debit cards. This demanded the use of other paraphernalia, such as the point of sale devices at the checkout counters. Now, with niche FinTech innovators such as Paytm and MobiKwik, even the point of sale devices are not required. It is just scan and pay. The government has taken this ease of payment a step further by bringing to light the Bharat QR payment method.

What is Bharat QR 

Bharat QR is a payment process driven by a Quick Response Code or QR code. A user who has the Bharat QR-enabled bank application on his or her mobile phone can make a payment quickly, easily and safely. The best part is that scanning the machine-readable optical grid translates the bank account information without your having to swipe or hand over a card, making it extremely convenient! This is because the QR grid stores the person’s bank information. This is similar to using a Paytm or a FreeCharge or a MobiKwik e-wallet, the advantage being that in Bharat QR, payments are linked directly to your bank account rather than to a separate e-wallet. There is thus no hassle of transferring money to your Paytm wallet or MobiKwik wallet. Alternatively, the user can also access Bharat QR through the Bharat Interface for Money or BHIM universal app, which is a UPI developed by the National Payments Corporation of India (NCPI).

Currently, Bharat QR is available on the mobile applications of 15 nationalised and private banks, namely – Axis Bank, Bank of Baroda, Bank of India, Citi Union Bank, DCB Bank, Karur Vysya Bank, HDFC Bank, ICICI Bank, IDBI Bank, Punjab National Bank, RBL Bank, State Bank of India, Union Bank of India, Vijaya Bank and Yes Bank. It is also linked to VISA, MasterCard, American Express and RuPay cards. Its scale is expected to increase in the coming days.

A look at Point of Sale

Bharat QR is thus a leap ahead of the Point of Sale payment mechanisms, which were the mainstream payment devices used at most commercial and consumer locations such as shops and restaurants. The Point of Sale or POS terminal is a computerised replacement for a cash register that can process credit and debit cards. A customer swipes their card in the machine and enters the PIN number to verify and complete the transaction. The POS is installed at the merchant location, mostly by the bank that they associated with. Not only does the merchant bear the cost of the device and the installation, but they are also compelled to pay the issuer bank a merchant discount rate (MDR). This is a percentage of the transaction value. In a bid to boost cash transactions, the RBI had rationalised the Merchant Discount Rate (MDR) for debit cards. Accordingly, a cap has been introduced for debit card point of sale payments, capped at 0.75% for transaction values up to Rs 2000 and at 1% for transaction values above Rs 2000. However, it continues to be an expense for the merchant, and is often passed on to the customer by increasing the selling price of the product or service. Often, buyers may not even realise that they are being charged extra for the MDR.

Other payment instruments: e-wallets

The first leg of replacing the point of sale was the onslaught of e-wallets such as Paytm and FreeCharge. Although they operate on the same principle as that of scanning a QR code, they are somewhat restrictive because they require both the transferor and the receiver to have the same e-wallet installed on their smartphones. The need was thus felt for a faster and easier money transfer mode, which caused the Bharat QR to come to the fore, thanks to the design and development by NCPI.

Advantages of Bharat QR

The Bharat QR is a step towards financial freedom by means of cashless transactions. It relieves one from the hassle of swiping at the point of sale or of facing detection troubles with one’s plastic money at the point of sale. Because there is no requirement of a physical use of a card, the risk of data theft or security issues through tampered or cyber-compromised point of sale devices is also minimised. Costs are reduced from both the consumer and merchant viewpoints, since the need for expensive point of sale devices and their MDR charges is eliminated. A significant advantage of Bharat QR is its ease of operation; i.e., the buyer and seller need not download the same payment application to make the payment happen, unlike Paytm. This is because the Bharat QR is directly linked to a single bank account. It poses a logistical relief, since businessmen now need not shuffle between different wallets and track their credits and debits – a tedious task. Moreover, the money transfer happens instantly because Bharat QR uses an IMPS service. Bharat QR truly has the potential to create a FinTech revolution.

It is clear that Bharat QR paves a convenient way ahead for paying and receiving funds. It is a great idea to get started on this universal tool. As a merchant, you must register with your banks to get authorised to receive payments through Bharat QR. Link your bank account to the BHIM app and generate your unique Bharat QR Code, take a print of your QR code and stick it onto your payment counter to get started.

Oct 24, 2018

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Revised GST Rates – with effect from 25 January 2018

The 25th GST Council was held on 18 January 2018, and the rates of 29 goods and 53 services were reduced to lower tax slabs. These revised rates came into effect on 25 January. Other highlights of the panel included the decision to divide between the Centre and State, collections worth ₹35,000 crores from the Integrated Goods and Services Tax. The proposal to bring petroleum and diesel products under the ambit of GST is likely to be considered in the next meeting.

Here are the key goods and services that have been lowered or raised into new GST slabs.  

Good/Service Present GST Rates Revised GST Rates
Diamonds & precious stones 3% 0.25%
Articles of straw, esparto or other plaiting materials, Velvet fabric 12% 5%
LPG supplied to household domestic consumers, Raw materials and consumables needed for launch vehicles, satellites and payloads, Tamarind kernel powder, Mehendi paste in cones, Tailoring services, Transportation of petroleum crude and petroleum products, job-work services for manufacture of leather goods and footwear 18% 5%
Sugar boiled confectionery, Drinking water packed in 20 litre bottles, Biodiesel, Drip irrigation system including laterals & sprinklers, Mechanical sprayer, Fertilizer grade Phosphoric acid, Bamboo wood building joinery, Transportation of petroleum crude and petroleum products with ITC credit, Metro and monorail projects, Common effluent treatment plants services for treatment of effluents, Mining or exploration services of petroleum crude and natural gas and for drilling services in respect of the said goods 18% 12%
Old and used motor vehicles(other than medium & large cars and SUVs) with a condition than no ITC is availed 28% 12%
Old and used motor vehicles [medium and large cars and SUVs] with a condition that No ITC is availed, Public transport buses that run on biofuel, Services by way of admission to theme parks, water parks, joy rides, merry-go-rounds, go-karting and ballet 28% 18%
Small housekeeping service providers, notified under section 9 (5) of GST Act, who provide housekeeping service through ECO,  without availing ITC nil 5%
Actionable claim in the form of chance to win in betting and gambling including horse racing nil 28%
Rice bran(other than de-oiled rice bran) 0% 5%
Cigarette filter rods 12% 18%

Oct 24, 2018

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Digital financing: The way forward for financial inclusion in Asia – E27

The authors Aman Bhargava and Akshay Sharma are Senior Vice President and Manager at Capital Float, respectively. Capital Float specialises in digital lending to MSMEs in India.

In this age of digital disruption where technology has made an impact across a number of service sectors — e.g. transportation (Uber), accommodation (Airbnb), retail (Amazon) etc.– finance is clearly no exception. Post the financial crisis, incumbent large financial institutions have been weathering a storm of increased capital requirements (i.e. reduced ability to lend) and increased regulatory costs whilst dealing with an erosion of public confidence.

Digital lending, a subset of digital finance, has been growing rapidly in several large economies in tandem with lending platforms (e.g. Lending Club in the US, Funding Circle in the UK, and Lufax in China). As terms such as peer to peer (P2P) and marketplace lending have come to dominate headlines, digital lending has begun to revolutionise the traditional lending business through the use of technology in order to reduce costs, underwritten with surrogate data points, and speeded up processes.

Lending — ripe for disruption

Lending itself consists of three key areas:

  • (i) Origination (or customer acquisition)
  • (ii) Underwriting (or credit assessment)
  • (iii) Execution (including documentation, contract and flow of monies)

Conventional lending, especially in emerging economies, is an archaic process that is ripe for disruption in each of the above areas.

Traditionally, customer acquisition occurs via brokers or middlemen, underwriting is heavily collateral-based and execution is a tedious process requiring a lot of paperwork that usually stretches up to six weeks in duration. Furthermore, there is a fear of rejection, which in several cultures prevents a number of creditworthy borrowers from applying.

While the opportunity to disrupt traditional financial services is immense, it is important to understand the key drivers in this field. Like most sectors, it is imperative that governments put in place an ecosystem that can help and enable players to create these disruptions.

The three most important enablers for digital lending are:

1. Telecommunications and connectivity

The telecommunication sector has been pivotal in spurring the digital revolution globally. Creating networks that enable consumers to connect from computers, laptops and mobiles are the most basic requirements to kickstart a digital revolution.

From financial services to retailers, everybody depends on networks to provide a compelling online and mobile experience. Telecom operators must offer an integrated, multi-channel or omni-channel user experience: on the desktop, on mobile devices and in stores. The reach of such networks is essential for digital finance to succeed and penetrate new markets.

2. Technology and data

Technology, as one would expect, is at the heart of the digital revolution. Investments in technology by organisations have only been increasing over time.

Advances in digital technology have allowed services to reach a number of people, who had limited or no access earlier. If these advances have to continue, then increased capital investment in equipment and software is an absolute must. Encouraging companies to invest more in R&D, say, via tax incentives is crucial to penetrating the consumer base.

3. Regulations and policies

Post the financial crisis, increased regulations have forced large banks to reconsider their traditional methods, especially in light of additional balance sheet charges. This has opened up new markets globally.

Regulators in the West, particularly the UK followed by the US, have been proactive in allowing these markets to grow and challenge the traditional players. As the rest of the world cautiously opens up to this new space, digital finance players have thrived under flexible and friendly regulations.

It is imperative to encourage an atmosphere in which innovation in financial services and products offered to consumers is prevalent. While the need to be cautious post the 2008 crisis is justified, regulators should be careful not to stamp out truly innovative and disruptive ideas.

Digital finance — banking for the ‘unbanked’

A recent report by The Guardian, states that almost 500 million people across Southeast Asia still often turn to informal moneylenders to meet their everyday needs. Decisions requiring credit, such as expanding a business, buying a house or paying medical bills, are taken out of the hands of the so-called “unbanked”. Uninsured and with no savings, they are also less resilient to health problems, unemployment or a natural disaster.

Digital finance holds the key for financial inclusion, as nearly 50 per cent of the population in developing countries own mobile phones. The impact of digital lending in emerging economies goes beyond the traditional financial services offered. It also helps create additional jobs and acts as an economic stimulator.

A number of firms in Africa and Asia are using digital finance to tackle development challenges. Technological innovations, like mobile money, have acted as catalysts in providing a variety of financial services. Consumers at the bottom of the pyramid in several countries today are using mobile money to make payments for a wide range of services.

Apart from traditional services — such as credit, savings and financial education — consumers also enjoy access to money-transfer services, micro-loans and insurance.

How can we make this happen?

MSMEs (Micro Small and Medium Enterprises) also stand to gain substantially from digital lending. Apart from access to finances, electronic payment systems allow them to secure a diverse range of financial products and an opportunity to build a financial history. The importance of digital finance in building both credit history and transactional data of individuals and firms for lenders cannot be underestimated.

Close public-private cooperation is a key factor for this type of innovation to be taken to scale and enable people to live a more secured, empowered and included life. If approached wisely, it is possible for emerging economies to leapfrog developed nations in the adoption of these digital channels, and at the same time accelerate financial inclusion.

Article sourced from E27. Read the original article here.

Oct 24, 2018