6 Types of Business Loans Available to SMEs In India

The Small and Medium Enterprises (SME) sector is of key importance to the Indian economy given that it employs the second largest workforce in the country after the agricultural sector.

Statistics offer a clearer picture. Accounting for 45% of industrial output and 40% of exports, the SME sector can be a significant driver of economic growth. SMEs also produces more than 8000 quality products for the Indian and international markets.

In recognition of their significant contribution, SMEs are receiving a welcome push from industrial associations and government bodies. Yet their biggest challenge continues to be business loan requirements. Lack of timely financial help wreaks havoc on the growth of small businesses. Funding, if not received at the right time is of no use. Often, SMEs are turned away by traditional banks for a number of reasons. Further, the inflexible and complex loan application and approval processes of conventional lenders are discouraging for most small enterprises.

Fortunately, change is in the offing. Thanks to the growing presence of FinTech lenders, small and medium enterprises have reason to cheer. Business loan requirements for two different companies can never be the same. Keeping this mind, online lenders like Capital Float have stepped in to offer a wide variety of customized loans for business in India.

Here is a quick look at the bouquet of flexible credit products that Capital Float provides to SMEs.

Term Finance:

A quickly disbursed working capital loan, Term Finance is a great product for B2B service providers, manufacturers, traders and distributors alike. It helps fast-track business growth and boost profit margins. Term Finance is a convenient means to acquire fast business funding needed to meet your short-term requirements and ensure a positive monthly cash flow.

Online Seller Finance:

With the online selling space growing exponentially, there is an omnipresent demand for high liquidity. Our Online Seller Finance has made loans for businesses in India, especially e-commerce merchants, easily available. B2C and B2B marketplaces can get ahead of competition, expand to new markets and diversify into new product categories with the help of this customized credit solution. Attuned to your business ambitions, this collateral-free business funding ensures you have liquidity in the swiftest manner possible.

Pay Later:

An innovative financial product, Pay Later is ideal for SMEs with increasing orders in the pipeline and need to make supplier payments regularly. It greatly benefits those that can avail large cash discounts from suppliers. Pay Later works well for an enterprise with a base of blue chip suppliers, too. Carrying a predefined credit capacity customized for every applicant, Our Pay Later credit facility helps a variety of SMEs in times of cash crunch.

Merchant Cash Advance:

A simple and user-friendly business funding solution, Merchant Cash Advance ensures you have access to liquidity as and when required. Most suitable for restaurateurs and retail store owners, your unique business loan requirements are met in the most affordable manner. Active use of card payment devices offers an easy experience to customers. Point-of-sale machines aren’t just means of cashless transactions; they can become instruments for availing working capital finance. Merchants who earn revenue from debit and credit card swipes can avail of business funding through this tailor-made financial product. We offer working capital finance up to 200% on the merchant’s sales from monthly card swipes. Capital Float has partnered with multiple point-of-sale (POS) card machine vendors such as MRL Posnet, Pine Labs, Bijlipay Mswipe, ICICI Merchant Services, etc. Partnering with these vendors helps merchants access their customized working capital solutions.

Supply Chain Finance:

Enterprises often need to work with multiple suppliers. Using bills as financial instruments then becomes a given. Delays in payment are likely to impact the growth of a business. Fully comprehending the importance of correct timing, Capital Float’s Supply Chain Finance has been designed to come to the aid of small and medium business owners. This unique loan product takes care of cash crunch situations through accounts receivable financing, which instantly liquidates the SMEs bills into cash. A revolutionary way to put more money into your business by collateralizing your business’ outstanding bills, Supply Chain Finance enables SMEs to procure an advance of up to 80% of their bill value.

Taxi Finance:

India is witness to the recent boom in the radio taxi business. Finding an Ola taxi or an Uber cab is convenient and something one can do round the clock. Inspired by these success stories a number of people from diverse walks of life are looking at taking up work as drivers for tech-based taxi services. While it offers an easy means to earn a good income and hold a steady job, the taxi business needs basic investment in the tools of the trade— a car wired into a tech-based platform.

Taxi Finance, Capital Float’s innovative financial product, offers taxi drivers the freedom to earn more. With this loan, a taxi driver can now own a car, operate independently, and enjoy the benefit of flexible working hours. Capital Float has partnered with several reputed taxi aggregators to enable cab drivers to ply their cars on their platforms and substantially increase their revenue. The aggregator repays the loan installments by deducting the amount from the driver’s earnings on a weekly basis.

Taxi Finance offers a simple, affordable way to earn on the driver’s terms, providing easy business funding that is in stark contrast to business loans in India offered by traditional banking institutions.

Conclusion:

Unique business loan requirements underline the need for tailor-made financial products. We have financial solutions that cater to any SME’s working capital need. Minimal documentation and zero-collateral are among the unique selling points of these business funding solutions. Additionally, easy eligibility criteria combined with no pre-closure or hidden charges make these funding options SME-friendly. With instant approvals and quick disbursal of business loans, it makes sense to choose from one of our many innovatively designed financial products.

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Budget 2017: Giving SMEs a stronger footing

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.

Infrastructure

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

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Top 3 Reasons Why Unsecured Loans Help Small Businesses Grow Faster

A small business generally embarks on its journey through investments from angel investors or venture capitalists. As its business matures, it may aspire to borrow more money not only to keep the enterprise operational, but also to explore new horizons. Such a small business can approach banks and other traditional non-banking finance companies (NBFC) to procure business loans. However, these institutions follow a prolonged process for loan approval and prefer providing small business loans only against collateral. Most small businesses that are still in their growth phase do not have sufficient collateral to get secured business loans, and so their only avenue for business funding is an unsecured business loan.

The new age FinTech companies such as Capital Float provide unsecured loans in India to small businesses to help meet their urgent business needs. By applying innovative technologies, they are able to process an unsecured loan application in virtually no time. Their processing, from loan approval to disbursal, also remains completely transparent throughout. Once approved, the unsecured business loan amount is credited to the bank account of the customer in three working days.

Unsecured small business loans come to the rescue of small businesses at critical times, and with the right amount at the right time, they considerably aid a small business in growing faster. Let us look at how taking an unsecured business loan helps in business growth.

Maintaining healthy cash flows

In the past, small businesses used to be averse to availing an unsecured loan due to concerns about falling into a debt trap. They also occasionally lacked confidence in their ability to repay unsecured loans. This is no longer the case. In a fast-growing global economy such as India, plenty of opportunities are available for small businesses to explore with greater confidence. Maintaining a healthy cash flow position provides them with additional funds for marketing of products and services, adding new inventory, expanding premises or hiring more staff.

Unsecured small business loans provide the strategic edge to make wise investment choices, which help a small business to grow faster. The revenue earned from new business ventures can be used to repay the unsecured loan and to boost the cash flow position.

Timely access to funds

One of the great advantages of taking unsecured small business loans from FinTech companies is the hassle-free and speedy loan approval process. Business opportunities today appear in a flash and and could quickly disappear, unless tapped at the right moment. Therefore, a small business cannot afford to spend time on filling up lengthy unsecured loan application forms and collating the required business documents in support.

The application for an unsecured loan from FinTech companies can be done online or through a mobile app, and all essential business documents such as bank statements, previous loan statements, tax statements, business invoices, KYC documents and the like can be uploaded online. These companies focus on providing unsecured small business loans to SMEs and fully understand the business challenges faced by them.

A variety of unsecured loans for different business needs

Businesses can avail unsecured small business loans at competitive rates from FinTech companies such as Capital Float according to their need. We provide a variety of unsecured small business loans that are designed to take care of differing business requirements. These include:

• Term Finance: Small businesses that have been in operation for more than two years and have sound business financials can take unsecured loans such as Term Finance. This product allows a business to borrow money varying from rupees one lakh to rupees one crore, for a tenure ranging from a few months to up to three years. A nominal processing fee is charged, and there is generally no pre-closure penalty.

• Supply Chain Finance: SMEs with invoice receivables from large companies can avail themselves of Supply Chain Finance for up to 80% of the invoice value. This unsecured loan can be repaid either through monthly instalments or as a one-time payment upon receiving funds on your invoices.

• Online Seller Finance: Certain loans such as Online Seller Finance have been designed keeping in mind the specific requirements of merchants who sell aggressively through online marketplaces such as Flipkart and Amazon India. Such merchants can take up to 200% of their monthly receivables as an unsecured loan.

• Merchant Cash Advance: Businesses such as retail stores and restaurants that receive the bulk of their payments through card swipe machines can also take up to 200% of their monthly receivables as an advance upfront through this loan product. Merchant Cash Advance can be repaid through a fixed percentage deduction from the card settlement amount in the subsequent months.

Benefit from competitive interest rates for unsecured loans

Besides the various innovative services offered through technology, FinTech companies such as Capital Float also offer unsecured loans at the most competitive rates. The services offered are thoroughly professional in nature as compared to other NBFCs, and greater flexibility is offered in the repayment of unsecured loan, so that a business can focus more on achieving its growth targets.

Capital Float acts like a partner to small businesses, which could be traders, manufacturers, service providers or retailers. Unsecured small business loans are provided based on the financials of a small business, and at no point is there a requirement to pledge any asset.

Capital Float believes in being the pioneer in innovation while offering unsecured loans in India to SMEs. This is showcased through our various unsecured loan products to fulfil needs of businesses in every sector. Capital Float charges a flat processing fee of 2% across various unsecured loan products, and no hidden charges are levied beyond the interest rates.

Oct 24, 2018

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