How Short Term Loans Helps Small Businesses in India

A competitive environment works as a catalyst for growth for businesses, large, medium or small. Small businesses in India have been flourishing in a disorganized market for a while now, capitalizing on trends and changing consumer preferences. Yet one of the challenges they have to deal with is the lack of timely funds, whether by way of short-term business finance or investment in technology or infrastructure for scaling up. The struggle to get affordable financing has resulted in many Small and Medium Enterprises (SMEs) failing to realize their full potential.

This scenario is changing for the better. Term loans offered by online finance companies like Capital Float are your new-age finance options for seizing business opportunities that come your way. A trust-worthy financial partner that you can rely on, Capital Float has helped  enterprises boost their profit margins with convenient short-term business finance options. While some businesses require high liquidity, some may not; but no enterprise can work effectively without adequate cash flows. Restrictive lending policies, inflexible collateral requirements and slow disbursement times offered by formal financiers are of no help to SMEs.

Term loans from online lenders offer a way out of crippling interest rates and the chronic cycle of debt. Read on to find out why it makes sense to seek short-term loans in India.

Easy application procedure

As compared to traditional banks, online lenders such as Capital Float offer the convenience of filling out a 10-minute application form from anywhere, anytime. Digitally uploading required documents translates into an easy and hassle-free process. Given this day and age of instant connectivity, this isn’t a tough task; but going through the multiple layers of process at a conventional bank is.

Prompt approval

Apart from a laborious process of submitting umpteen documents and heavy paperwork, it is likely that a conventional lender will keep a small business owner waiting for loan approval. Compare this to a situation where applicants receive instant approval in minutes. Short loans are the lifeblood for a business. Meeting a smooth supply chain, daily payments, urgent expenses and several other unforeseen expenditures are part and parcel of business operations. Thus lack of liquidity can have ripple effects on many aspects of a business. Through quick approvals for term loans, online lenders ensure SMEs avert such crises with short-term business finance, available practically at their fingertips.

Not just fast, friendly too

Unless SMEs have some collateral to offer, turning to conventional lenders for term loans might be futile. Traditional banks are highly inflexible when it comes to scanning an applicant for short loans. Public Sector banks require a business to be running for at least three to five years to be eligible for a loan. The same holds true for private banks, traditional NBFCs and moneylenders. This is where new-age fintech lenders make a difference. Far more customer-friendly, and digitally enabled, lenders such as Capital Float provide Small and Medium Enterprises even as young as one year old with short term business finance. Aspiring entrepreneurs need some handholding when it comes to finances. These digital lenders are here to do just that.

Easier on the pocket

Term loans acquired through traditional means dig deep into your pockets. But, those availed of online are far easier for a number of reasons, including.

  • Pre closure penalties go up to 5% of the loan. This isn’t the case if you choose to get short-term business finance from Capital Float. We levy no such charges on clients if they wish to close the loan ahead of the term.
  • The processing fees for a short loan offered by traditional lenders start from 2% and in many cases go up to 3%. Financing through Capital Float means SMEs only have to bear a fee of up to 2% in processing fees.
  • An online lending platform offers small business applicants the flexibility of loan tenure— they can choose from anywhere between 1 month to 12 months. Conventional lenders and most private banks don’t offer term loans for that short a period.
  • Short-term business finance procured from PSUs, private banks and traditional NBFCs carry a hidden charge. SMEs don’t have to worry about that when they approach Capital Float for a short loan.
  • Strict repayment options are one of the characteristics of a term loan procured through traditional means. These work on an EMI-only basis. Would it not be far more convenient to have a choice of flexible repayment? All of Capital Floats’ financial products come with easy repayment options. All loan products are offered at a reasonable interest rate.

Variety of loan products

At Capital Float, we understand that every SME works in an unique environment and has particular working capital needs. Keeping this crucial fact in mind, the company offers innovative and flexible credit products to meet a variety of financial needs. Delivered in an efficient and customer-friendly manner, our short-term business finance is here to help SMEs meet their credit requirement anytime.

SMEs can choose from a host of short loan products that best match their business needs. These include Term Finance, Online Seller Finance, Pay Later Finance, Merchant Cash Advance, Supply Chain Finance and Taxi Finance. Capital Float believes in being transparent in its business transactions and boasts of a wide customer base. B2B service providers, manufacturers, traders, distributors, and aspirational taxi or kirana storeowners are part of Capital Float’s customer base, as its products have helped all these businesses bridge the credit gap comfortably.

There has been a steady growth in the number of small and medium enterprises in the country over the past five years. More interesting, the sector is opening up avenues for tech-driven innovation. However, this flourishing sector still requires substantial monetary support in order to improve its higher global competitiveness over the next five years. Conducive governmental policies along with easy access to finance will greatly enable ease of doing business. In addition, short-term loans for businesses in India, sought through fast, friendly and affordable means, are what will nurture India’s entrepreneurial spirit.

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Unsecured Loans – Is It The Right Option to Grow Your Business?

Achieving growth is a dream for every business, more so if it is a small or medium enterprise. Who doesn’t like expanding their production and also the revenue of their business? While business expansion is necessary, one thing which is primarily required for business growth is finance (with acumen being the second important ingredient). How does one secure business finance?

Banks and financial institutions provide the solution – business loans.

Business loans are the perfect solutions to financing which enables business growth. Banks and financial institutions lend the much-required business finance in India to business enterprises. This finance comes in two variants – secured loans and unsecured loans. Do you know what they are and how they are different?

Secured business loans

Secured business loans are also called asset-backed loans. These loans are granted on the value of an asset which is pledged as collateral for the loan. These loans are risk-free from the lender’s perspective as in the case of default by the borrower, the asset which is pledged is possessed by the bank to fulfill the loan liability.

Unsecured business loans

Unsecured loans, on the contrary, do not require any collateral or security. The loan is granted on the repayment capacity of the business which is indicated by the enterprise’s creditworthiness. These loans are granted as short-term loans which also have short repayment tenure.

Difference between the two

Both secured and unsecured business loans are fundamentally different and their differences are as follows:

 Secured Loans  Unsecured Loans
They require a security against the value of the loan  These loans are granted without the requirement of any collateral
The interest rate is low  Interest rate is high
The amount of loan depends on the value of the asset pledged for the loan The amount of loan depends on the repayment capacity and creditworthiness of the enterprise

Do unsecured loans help in business growth?

Unsecured loans are very easily available and do not require any collateral. They thus have various advantages which make them an ideal solution for quick financing. But do such loans also enable business growth? Let’s find out:

No asset backing required

Secured loans are limiting in the sense that they require business assets to be pledged as collateral. Unsecured loans are easily available and they do not require any business assets to be secured. As such these loans are not restricting. If your business is small and does not have many assets, it becomes a problem to avail a secured loan. This hinders the growth of business. Unsecured loans, on the other hand, can be availed without any assets.

The quantum of loan is not limited

Suppose you require a loan worth Rs.50 lakhs but the value of assets which are to be pledged is limited to Rs.40 lakhs. Would you be able to acquire the desired loan? Secured loans allow loans limited to the value of the asset pledged. Even in this case, the total value of asset is not allowed as loan as a margin is retained by the lender. So, if you have an asset worth Rs.20 lakhs and want a loan of Rs.20 lakhs, you would be able to avail only 80% to 90% of the value of your asset (Rs.20 lakhs in this case) as loan (i.e. Rs.16 lakhs or Rs.18 lakhs). In case of unsecured loans, the loan is granted on the business potential and creditworthiness and not limited by the value of any asset. Thus, businesses can avail an unsecured loan as per their requirement for aiding growth.

Easily available

Unsecured loans are easily available as the funds are sanctioned within days of the loan application being done. As such, these loans provide the necessary funding to businesses in a short span of time which can be used to increase business profitability and boost business growth. These loans come in handy when the business is poised to grow following a surge in demand. As the loan is easily available, high demand can be met by increasing production. High demand yields better revenue for the business and enables it to grow.

Ideal for young businesses

Businesses which are still in their nascent stage require funding to expand and grow. This funding can be easily secured through an unsecured loan as it does not require any collateral, which is hard to source for budding businesses. Thus, the growth of these young enterprises is dependent on unsecured business loans.

Unsecured business loans, therefore, play an important part in the growth of businesses. Though long term secured loans are essential for long-term finance, short-term unsecured loans help businesses meet their more immediate requirements, which has a direct bearing on their growth.

NBFCs offer unsecured business loans which are also called as business installment loans or term finance. This loan offers the following benefits to businesses:

1. A loan of Rs.1 lakh to Rs.1 crore can be availed by businesses for any of their requirements.
2. There are no hidden or additional charges under the loan. Applicants are required to pay only a small processing fee of 2% of the loan amount borrowed. Apart from this there are no foreclosure or part-prepayment charges incurred on the loan.
3. Certain NBFCs use customized credit criteria while underwriting customers. The credit offering is tailored as per the applicant’s requirement.
4. The loan is sanctioned within 3 days of successful application thus providing the funds at the earliest.
5. No collateral security is required for the loan.
6. Application for the loan can be done quickly through the online medium which reduces unnecessary hassles.

Unsecured loans sometimes prove to be that important source of funding without which businesses couldn’t have grown and achieved enhanced profitability. If you are also looking for a business loan for your business growth avail an unsecured loan today!

Oct 24, 2018

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HOW TO ENSURE CUSTOMER RELATIONS ARE MAINTAINED DURING COVID-19?

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

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Tax Slabs & Understanding the Dynamics of Transactions under GST

Effective July 01, India would be joining a host of 160 other countries that have implemented GST/VAT in some form. This is a big step towards streamlined taxation norms. From new indirect tax slabs to drastically different taxation procedures, the Goods and Services Tax or the GST, will compel companies and taxpayers to realign their operating models.

Tax slabs in India under GST 

The new indirect taxation regime is based on a four-slab tax structure, and goods and services feature in these depending on their nature – whether it is a luxury item, a necessity or a leisure item. A total of 1211 items have been categorised under these four tax slabs, with a bulk of them (including services) being placed in the 18% bracket.

Previous tax rate (Approximate range) GST Rate Goods Services
No tax No tax Items of daily and mass consumption such as milk, butter, fresh fruits and vegetables, fresh meat, flours, bread, salt, prasad, bindi, sindoor, stamps and judicial papers, colouring books, newspapers, bangles etc. Hotels and lodges with a tariff below Rs 1000.
~ 5% (5% VAT and no excise) 5% Apparel below Rs 1000 and footwear below Rs 500, and essentials like kerosene and coal, medicines and insulin, stents. Edible oil, tea, coffee, frozen vegetables, skimmed milk powder, cashewnuts, incense sticks. Small restaurants, transport services like railways and air which have petroleum as the main input. Job works in textiles, gems, and jewellery.
~ 9% to 15% 12% Apparel over Rs 1000, Ayurvedic medicines, exercise books, preserves like pickles, sauces, ketchups, and fruit and vegetable preserves, umbrellas and packaged foods like butter, ghee, cheese, dry fruits. Basic cell phones. Non-AC hotels, pesticides and fertilisers, business class air tickets and work contracts.
~ 15% and 21% 28% Luxury goods and sin goods: SUVs, aerated drinks, white goods, paints,  ATM/ vending machines, vehicles, personal aircrafts; Sin goods such as bidis, chewing gum, paan masala. Certain select consumables will attract an additional cess. Movie tickets above Rs 100, five star hotels, race clubs, betting and other luxury services.

– Gold and rough diamonds have been allocated separate tax percentages of 3% and 0.25% respectively.

– Certain goods such as alcohol (for human consumption), consumption and sale of electricity, stamp duty and customs duty, and five petroleum products, namely, crude oil, natural gas, aviation fuel, diesel, and petrol have been excluded from GST for the initial years.

1. The GST council has revised the tax rates on 27 goods and 12 services with effect from 6 October 2017. Click here to read the revised list.

2. The GST council has revised the tax rates on 177 goods and services with effect from 15 November 2017.

3. The 25th GST Council met on 18 January 2018, where a third round of revisions was announced on 29 goods and 53 services, with effect from 25 January 2018.

How the transactions will change

Businesses will be impacted at both ends, i.e., at the inbound transactions such as imports (international business) and procurements (domestic), and at the outbound transactions, i.e., the sales. Here are some important transformations:

Place of Supply: Currently, many businesses operate on a state-wise warehousing model as transfers between inter-state warehouses are considered as stock transfers and are not liable to pay CST. Under GST, inter-state stock transfers between warehouses will also be subject to IGST at the “Place of Supply”. For example, a supplier of steel from Jharkhand to Orissa and Kerala, will need to pay IGST on the transfer of goods in Orissa and Kerala respectively. If there is a transfer of steel from the warehouse in Kerala to the warehouse in Orissa, IGST would still be applicable, but CST wouldn’t be payable on such a transaction. This change has been proposed to discourage suppliers from having multiple warehouses and adopt a single warehousing system.

Consideration of “Time of Supply Rules”: This factor determines when goods / services are to be supplied, and therefore, when the tax is to be paid (point of taxation). Under the GST, the Time of Supply for goods and services is the earlier of the following dates: (a) the date of issuing of invoice (or the last day by which invoice should have been issued) OR (b) the date of receipt of payment; whichever is earlier. For example, if the date of invoicing is May 20 and payment is received on July 1, the time of supply will be May 20. Which means that the  government wants to collect the tax at the earliest possible point in time, and businesses must plan their working capital keeping in mind these advanced payment timelines.

Provisions of Input Tax Credit: Input tax refers to the taxes that a manufacturer or service provider pays while buying the raw material or inputs. Under the GST, a business can reduce the tax it has paid on inputs from the taxes collected on outputs. In effect, businesses will be taxed only on the “value addition”. For example, if a manufacturer is paying Rs 300 on final product and has paid Rs 200 on inputs, he can claim input credit on Rs 200 and has a tax liability of only Rs 100. This facility will bring down the overall tax expenses of companies.

Lower exemption thresholds for Small Scale Industries: Currently, small scale industries can avail central excise threshold exemption of Rs. 1.5 crore. With the GST, this limit will be reduced to Rs. 20 lakh. As a result, a company that used to avail tax exemption of 1.5 crore can now avail only 20 lakh, leading to higher tax payments.   Benefits from higher registration threshold: Businesses with turnover of over 20 lakh (10 lakh for the North East) must mandatorily register for GST. Currently, the criteria for VAT is that businesses with turnover of over Rs 5 lakh (Rs 10 lakh for North East) must register for VAT. As a result a business that was in the Rs 5 lakh – Rs 20 lakh bracket is now exempt from indirect taxation.

These are some of the business-transactional implications of the GST. Organisations will have to design and implement extensive change management exercises to align GST with their desired business outcomes. Get more information about GST on our GST blog.

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Oct 24, 2018