Lack of adequate funds is one of the main reasons why enterprising individuals with innovative business ideas often struggle in materialising their projects. Even after a venture takes off and begins to grow, it will need extra funds at some point in its growth journey to enhance its operations and pay its suppliers. A business loan in India has been typically procured from banks, but over the past decade, though the number of small and medium enterprises (SMEs) has risen sharply, most of the SMEs who had applied for business loans remain unfinanced at large.
The gap between this demand and supply for loans is gradually being closed by new age FinTech lenders. By providing quick loans without collateral, FinTech companies are helping entrepreneurs in harnessing the full potential of their business ideas. However, the competition in this field continues to be huge, and applications for business finance are still approved based on creditworthiness.
If you are grooming your entrepreneurial venture for more success and plan to apply for business loans online, here are some tips to improve your chances of approval:
1) Create a neat business plan – You must have chalked out a business plan before foraying into a field of your interest, but if there are no formal documents in its support, it is important to prepare them. A formal business plan must include the objective of the project, the way it plans to earn revenue, the development strategy and the marketing methodology. It should also have copies of financial statements and the data on cash flow projections.
If you do not have an official business plan, you may be asked to demonstrate a solid record of revenue generation with at least one year in business. To get the application for an unsecured loan approved, it is important to prove that you are capable of repaying the loan amount without default.
2) Include a documented plan on the intended use of the loan – When you need a loan for business, you must also be able to tell the lender about its exact purpose. Be it a bank or a FinTech company, the lending institution will determine the credibility of your application on the basis of the reason for which you need the loan. While all organisations have their own unique requirements, the most common grounds for loans are business expansion, raw material or inventory purchase, administrative expenses and capital investments. You can also borrow from a digital lender to refinance or pay off old debts.
3) Know what kind of loan will suit your needs – Even after you describe the purpose of your loan, you may be faced with multiple loan categories that you can apply for. It is good to know the details of each – in terms of interest, tenure, payback plans and documents necessary to procure them. Banks and digital lenders often categorise their loan products for the ease of disbursement and management. While some credit products help in quick invoice financing, others may be more beneficial to buy inventory. Consult the lender to borrow profitably.
4) Double-check your cash flow projections – When a business does not have a high credit rating or a strong history of generating revenue, it typically gets saddled with a high interest rate on unsecured loan. It is therefore important to assess your cash flow projections. You must have a good knowledge of your ability to pay back and ensure that you will soon have adequate funds to clear off your debt.
5) Be aware of the risks that lenders assess – Lending institutions in both public and private sector evaluate loan applicants on a scale of risk. If a business is considered a ‘risky borrower’, there is a high chance that its loan may not be approved. The traits that make a business look risky are as follows:
– Very small owner’s equity
– Poor credit history or defaults in payment of previous loans
– Poor revenue earnings
– Very short period in the industry
– Weak accounting system
– Questionable management
6) Leverage your personal creditworthiness – Usually a business is a different entity from its owners. Even a sole proprietorship is a separate legal entity for accounting purposes. However, when it comes to getting a business loan without collateral, even a clean personal credit history can help you in obtaining the amount you seek. The strategy is to make payments on any outstanding personal debt and credit card bills as much as you can afford. This will give your lender more faith in your business and assure them that you are not burdening yourself with unpaid debts. You can personally guarantee for your business loans by proving your ability to repay them.
7) Research extensively for lenders – If you were denied a loan for business by a bank or a traditional lending agency, do not consider it the end of your search for funds. A FinTech company offering unsecured business loans evaluates your creditworthiness using parameters different from those used by banks. If you can successfully prove your expertise in business, FinTech lenders will provide adequate financing for your immediate working capital needs. So, think beyond the conventional platforms and apply for finance online using those documents that demonstrate your ability to pay back in time. Digital lenders also grant short-term loans, the amount being disbursed in a few minutes post the approval of the loan application.
The online lending industry has shown that getting a business loan need not be a frustrating process for SMEs anymore. FinTech companies are willing to grant loans and the application process can be effortless. All you need to do is start preparing early (in lieu of the competition from other similar applicants) and collate the minimum essential documents in support of your application.
At Capital Float, the basic premise is that all applications for getting a business loan will be evaluated with speed, efficiency and favour. The products for business loan in India are custom-fit for SMEs and include Term Finance, Online Seller Finance, Pay Later Finance, Merchant Cash Finance, Supply Chain Finance and Taxi Finance.
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To provide quality education, private schools in India must have cutting-edge infrastructure and well-planned facilities. This is even more important now because the generation currently in schools is growing in an environment of mobile computing devices and e-commerce. Since private institutions are entirely dependent on their own earnings to improve their campus, they may need school loans to finance such expenses.
Let us look at the top reasons that drive schools towards taking loans from banks and NBFCs:
1. To construct a new school building
Loan for construction of school building is commonly sought by institutions that are successfully providing education services but need more classrooms to accommodate the increasing number of students. Adding more sections for each grade is also a good idea when schools are focused on keeping a low student:teacher ratio.
2. To build a playground/sports court
School loans may also be required to add a playground, basketball courts, tennis courts or rooms for indoor sports. Games are an essential part of school education, and if a small unsecured loan from an institutional lender can help to build a beautiful playing field, the investment is worthwhile.
3. To develop a laboratory
Schools need to have well-equipped labs for practical experiments concerning physics, chemistry, biology and to give students hands-on experience with computer studies. Some private schools are also required to have Home Science labs as per the curriculum for their students. A quick loan for school laboratory can be procured at easy terms from a FinTech lending company. Such lenders usually provide up to Rs 50 lakhs on loan for building school laboratory.
4. To buy furniture for classrooms, staffroom
A simple reason to apply for a loan could be the purchase of new or additional furniture for students and staff. The cost of ergonomic desks and chairs may not be within the budget of the school, and financial support from a FinTech company can come in handy.
5. To purchase commercial vehicles
Schools that provide transportation services to their students and staff may need to buy new buses or vans. If adequate finance is not available for such purchases, FinTech lenders can offer simple digital modes to provide unsecured loans with flexible repayment options.
6. To build or improve a library
Well-stocked libraries are essential components of any school’s infrastructure. A school that has been running successfully for some time, but does not have a library, can borrow funds from school loan companies to build a quality library on its campus. Unsecured school loans can also be taken to buy stocks of new books that are too expensive to purchase in the available library budget.
7. To start a new facility on premises – stationery/canteen/uniform shop
Private schools try to offer all the essential facilities for the convenience of students. If there is a stationery unit on the campus, students can purchase prescribed textbooks and other essential items without having to visit markets. A shop for summer and winter uniforms makes it easy to buy the exact uniform as required by the school. While canteens are not “must-haves”, they are good to provide hygienic menu options to the students and staff. School loans may be taken to fund such facilities.
8. For repairs and renovation
A school that already has structures or facilities for education and sports may also need a loan to repair, renovate and improve them. It can digitally apply for such funds on a FinTech company’s website.
9. To purchase new teaching devices, audio-visual equipment
School loans fund the purchase of interactive teaching devices that are becoming increasingly important in the digital age. Educational institutions can borrow to install whiteboards, overhead projectors and other audio-visual teaching aids to make learning more interesting for their students.
10. To add/improve day-boarding facilities
Some private schools offer day-boarding amenities to their students. As a part of this facility, they need to provide healthy meals and areas for rest and recreation. To build and improve such environment, they may need loans that are offered most conveniently from FinTech companies.
As a leading digital NBFC offering loans to educational institutions, Capital Float funds all such requirements of schools in India. To know more about our financing products, feel free to call us on 1860 419 0999.
Oct 24, 2018
MSME is an important sector for the Government, as it maintains a relentless focus on increasing GDP and employment. Formalization of MSME businesses is being undertaken on a massive scale after demonetization and the introduction of GST. The core focus of the Union Budget 2018 indicates the Government’s commitment to continue strengthening MSMEs from the base of the sector.
Lending a Hand to MSMEs
With the Union Budget 2018-19 in play, the refinancing policy and eligibility criteria under Micro Units Development and Refinance Agency (MUDRA) program will be reviewed to encourage easier financing of MSMEs by NBFCs. The Government has set a target of ₹3,00,000 crores for loans to be provided under MUDRA in 2018-19. Specific measures to address NPAs of MSMEs were promised to ease the cash flow challenges that they face. The tax burden on MSMEs has been reduced by axing tax rate to 25% for those with revenues of below ₹250 crores. Recapitalization of PSU banks will add an additional ₹5,00,000 crores to the available lending pool this year. A unique Aadhaar-like identity for each enterprise is planned for streamlining business identity. This measure can enable Fintech lenders to process eKYC of enterprises swiftly and offer working capital finance in a matter of minutes. Furthermore, the Finance Minister Arun Jaitley called out Fintech lenders in his speech and emphasised their importance in financing the development of MSMEs in India.
A five-year tax holiday was granted to Farmer Producer Organisations (FPO) with a turnover below ₹100 crores to encourage post-harvest value addition. The Government has also promised a Minimum Support Price (MSP) crop of 1.5 times the production cost to farmers. In addition, several proposed measures related to the farm sector include – funds to develop agricultural markets, improve agricultural logistics, enhance rural connectivity, and distribute Kisan credit cards to farmers in fisheries and animal husbandry sectors. This sets the precedent for these sectors to create a digital footprint, facilitating them to receiving customized finance in the future from digital lenders like Capital Float.
The Finance Minister proposed to extend the tax relaxation period to 150 days to footwear and leather industry to boost the creation of employment at the grassroots level. An additional ₹10,000 crores have been allocated for fisheries, animal husbandry and aquaculture industries. This is expected to aid more micro-segments in being included in the formal financial ecosystem
New Financing Avenues
In a bid to help start-ups and venture capital firms to attract foreign investments in niche areas, the Government will evolve a coherent and integrated policy for ODI (Outward Direct Investment) and hybrid instruments. The basket of eligible FDI instruments will be expanded to include these under certain conditions.
Taking a Position on Crypto Assets
The Government has reiterated that it is illegal to transact using cryptocurrencies, though it does not categorically state that it is illegal to hold these assets. The Government will intensify its efforts to eliminate illicit transactions in cryptocurrencies. It also proposes to explore the use of Blockchain technology to enable more transparent payment mechanisms to boost the digital economy further. These efforts certainly forward the shift of business transactions from being paper-based to paperless, while adding clarity on which methods of digital payment are acceptable and which aren’t.
MSME – Key to India’s Industrial Growth
MSME sector plays a key role in India’s journey towards becoming the 5th largest economy in the world. Several measures to ease cash flow have been proposed which are likely to make lending more readily available to MSMEs. With Fintech lenders leading the charge on the financing front, MSMEs can be expectant to receive timely credit support to actualize their business ambitions and achieve remarkable growth this year. Several micro-segments are also expected to be absorbed into the formal financial system, as Fintech lenders like Capital Float continue to champion for the cause of financial inclusion in India.
Oct 24, 2018
We have created ‘GST- An Overview, Its Impact & Significance’ as a comprehensive GST handbook comprising of every aspect related to this new reform, with a special focus on Small and Medium Enterprises (SMEs). Starting with the salient features, this GST ebook takes readers through the three main components of the tax which eliminate the cascading effects of taxation. Further, the registration process, four-tiered tax structure, the benefits as well as challenges are explained in the GST whitepaper.
How this Whitepaper will help simplify GST for you
- Revised GST Rates Update
- Industry-wise Analysis of GST Impact
- Clear, Brief Descriptions of Key Aspects
- Easy Roadmap to Implement GST Changes
- Business Advice by Financial Experts
Oct 24, 2018