Small business owners often have to go an extra mile to ensure the consistent growth and success of their ventures. They must work hard in dealing with their customers and suppliers. They also need to come up with innovative ways to market their products and services. In their efforts to polish the customer-facing, technical and marketing aspects, small and medium enterprises (SMEs) often overlook the attention that their creditworthiness requires, which is vital to their chances of getting business loans.
If all goes well for the business and it is able to get a constant stream of customers, its position in the industry will be strengthened. This, in turn, opens doors for business finance from banks, conventional non-banking finance companies (NBFCs) and the new age NBFCs in the form of FinTech lenders. However, a few clever methods help in improving the prospects for business funding.
If you are an entrepreneur with a promising business idea that is backed by adequate possibilities for success, you must take it forward. To improve your chances of getting a loan for business expansion, here are the three points that you can pay heed to:
1- Make timely payments on your bills and clear outstanding credit
Financial discipline is the key to success when you are managing a commercially motivated organisation. In business, you may have to make regular payments to your suppliers and vendors. These ought to be made on time.
With frequent delays on the payment of your outstanding invoices, you may hurt your prospects for being qualified for business loans. A late payment on bills can damage your financial records, particularly if it gets reported to business credit scores rating agencies such as CIBIL.
If you had missed a couple of payments, but later managed to catch up with the regular cycle, the delayed payments may have had some adverse impact on your credit ratings. However, the damage is not permanent. As credit scores are a reflection of activities over a period, it can take some time for the new data to set in and replace the older information. The credit score will gradually improve to reflect your eligibility for business finance.
The focus should be on making payments on bills before they are due. This is not only a good habit that will help your business get higher credit ratings, but will also improve your relationships with the suppliers and vendors. If you have severe financial constraints, you can use strategies such as invoice financing. (Link to relevant product page can be placed here)
In addition to the bills raised by entities dealing with your company, payments on credit cards and existing loans should also be made on time. Most importantly, keep all the receipts against payment safely in your records.
2- Use credit prudently
The FinTech revolution has given access to fast business loans and has made it convenient for SMEs to expand their presence in the market. If you can demonstrate the ability to use your loan for business wisely, it will only improve your business credit rating and will help you borrow bigger amounts in future.
Funds must be used for the purpose that was stated to procure them. If you have taken a loan for business activities – such as paying a vendor, buying raw material or inventory, refurbishing a storefront – it must be used accordingly. Do not use business finance for personal expenses. The mixing of personal funds with those for business can happen unknowingly at times, especially for start-ups and sole proprietorships, but the two should be separated as soon as possible. This helps in improving the credit history records considerably.
Another point to understand here is – if your business has credit accounts in good standing, but you barely use them, do not be tempted to close such accounts. They may come to the rescue of your business plans in future. What is more, the closure of any account trims down the total amount of credit that may be available for your company, and conversely, increases the ratio of credit utilisation stats – this change of numbers will negatively impact the credit score.
When the debt load is haphazardly scattered in multiple accounts, you should work on reordering it so that there are smaller balances on different accounts. Once you are able to make regular payments on them, it will gain you credit for paying off more than one outstanding balance.
3- Avoid taking hasty or risky decisions
When you are managing a business and dealing with people from different fields every day, you will have your own experiences and learn to do things differently. Keep a vigil on the financial situation of your organisation even if you have hired accountants to manage your finances. Decide upon the figures that you aim to achieve and know what it will imply for the health, bottom line and future prospects of your business. This helps to maintain focus and financial discipline.
Avoid the risks that can affect your business credit scores. Some activities such as dealing with other companies of dubious nature not only harm your brand image, but also deter your business finance providers. Keep away from inherently risky operations that can cause financial stress in future.
Lastly, if you spot any mistake in your credit history records, do not hesitate to get it amended or inform your prospective lender. If you had paid off a bill in time but it was shown to be outstanding by the concerned entity, divulge the receipts to make corrections and prove your point. As a FinTech company offering quick loans to small and medium enterprises, Capital Float is on a mission to promote the spirit of entrepreneurship in India. Our process of evaluating the creditworthiness of a business is concise, lucid and clear-cut. It enables a high number of businesses to get timely funds. Capital Float also guides start-ups and growing companies in improving their prospects for bigger loans in future. Visit our website to find the best product that suits your business need.
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Coronavirus pandemic has impacted millions of people around the world. The virus has also affected lakhs of people in India, leading to several lockdowns to curtail the transmission of the virus.
These lockdowns have severely affected various sectors throughout India, chief among these being the restaurant industry. If the coronavirus pandemic lasts for a long period, people may get habituated with the idea of not dining out, which will inevitably take the industry longer to recover.
In India, the restaurant industry has faced numerous challenges because of the COVID-19 outbreak: the end of group dining at restaurants, protecting the health of both the employees and the customers, following the safety regulations laid down by the Government, working with a limited number of workers, running expenditure without revenues to match, etc.
Restaurants can address these challenges by actioning the following:
- Focus on takeaways: Group dining has become a thing of the past due to the coronavirus pandemic. In this situation, focusing on building the business via takeaways would be a wise decision. This would promote social distancing and would prevent the virus from spreading while ensuring operations are sustained.
- Collaboration: Restaurants can collaborate to benefit from each other’s strengths. This would not only reduce cost but also increase the number of customers (combining the customers of both the restaurants). The merged restaurant can prepare their best dishes (for which they are famous) and focus their efforts on selling these (which would also result in zero wastage). Collaboration would also help in merging the workforce and have more people available for extensive cleaning and door-to-door delivery.
- Social media marketing: With the onset of COVID-19, traditional marketing wouldn’t prove to be fruitful. On the contrary, it will be expensive. Owing to the lockdowns, people are getting time to surf on social media. Thus, social media marketing would catch their attention. Restaurants will also be able to connect directly with their customers to build effective customer relationships.
- Opt for online food ordering: Since people cannot go to restaurants, the only way for these businesses to operate would be through food delivery. They can list themselves on Swiggy, Zomato or other food delivery aggregators to increase sales. They can even opt for food orders placed directly through phone calls. This would reduce costs and create a revenue stream.
- Create a social awareness program: The restaurants can create a social awareness program around frontline healthcare workers of COVID-19 by supplying them food. Apart from the element of social service, this can also be marketed or advertised on social media and other digital platforms to create goodwill amongst customers.
- Follow the norms laid down by WHO on hygiene: There are operational challenges in the wake of the pandemic. To overcome those, restaurants should maintain hygiene by extensively using hand sanitizers. They should bear in mind that food safety should be their priority. The working stations should be wiped down at regular intervals using a bleach solution. The executives and valets should be cautious during food delivery and opt for contactless payments.
Oct 24, 2018