Top Reasons Why Unsecured Business Loans Are Becoming Popular

During the lifecycle of a business, there are times when the inadequacy of working capital threatens the flow of operations and hinders growth. Traditional lending institutions in India such as banks rarely provide assistance in such situations, as they generally demand collateral, which small business and young entrepreneurs may not possess. An unsecured business loan can take care of routine business expenditure such as maintenance of machinery, making payments to suppliers and purchasing raw material. It can also be useful for business expansion activities such as purchasing new machinery or expanding premises.

Moreover, all small and medium enterprises need funds to seize new opportunities for growth, and the window for such opportunities is usually small. In such a scenario, there is a need for quick access to funds. The loan repayment schedule also needs to be synchronous with the expected revenue flow from a business venture. Hence, an unsecured business loan taken from a FinTech company works best for them, as it is disbursed much faster than a loan from a bank. Further, these FinTech companies ensure that an SME is always at ease while paying the loan instalments.

Unsecured loans are turning extremely popular amongst small businesses communities. These are a few reasons why.

They help strengthen the business finances

A suitable business growth opportunity can present itself at any time, and therefore a small business needs to have access to adequate resources at all times. In case the cash flow situation is imperfect or there is a working capital requirement to meet routine business expenses, it helps to take an unsecured loan for a short period until the situation improves. This ensures that a small business will never find itself at a disadvantage when a new opportunity presents itself. Such loans from FinTech companies do not come with any prepayment penalty, and their tenure can vary from a few months to a couple of years.

Faster approval and quick access to funds

The digital revolution and the subsequent development of IT systems and processes have led to the rise of new age FinTech companies over the past five years. FinTech companies in India follow a completely different approach to the unsecured business loan market, as they use innovative technologies to profile, design and disburse loan products for small businesses. Even the application for an unsecured loan can be made online or through the mobile app, and all supporting documents such as bank statements, tax statements, previous loan statements, KYC documents, business receivables and other relevant documents can be uploaded in digital format. The use of advanced analytic techniques allows these companies to process a loan application within minutes. Upon approval, the loan amount is transferred to the borrower’s bank account within a few working days.

An unsecured loan product for every business

Extensive use of technology enables FinTech companies such as Capital Float to design new loan products that are meant to fulfil varying business needs. The loan product, Term Finance, is meant for small businesses that have been in operation for more than two years and have been doing good during that period. Such businesses can take business loans from ₹1 lakh to ₹1 crore for a duration of a few months to three years.

Supply chain finance is meant for small businesses that have blue-chip companies as customers. Such businesses can take up to 80% of the pending invoice value as an unsecured loan. The loan can be repaid either as monthly instalments or at one go upon receiving payments from the customer.

Unsecured loan products designed to support digital economy

Online Seller Finance is another loan product from Capital Float that is designed for businesses that generate revenue through e-commerce marketplaces. It provides up to 200% of the monthly sales volume as advance to such businesses. This money can be used to accelerate business growth online.

Similarly, merchants that receive the bulk of their payments through PoS terminals can avail up to 200% of their monthly card settlement value as advance through a customized finance product called Merchant Cash Advance. The loan amount can be repaid through the deduction of a fixed percentage from card settlements in the subsequent months.

Get loans on the most favourable terms

Capital Float offers loans at the most competitive rates. These unsecured loan costs can be brought further down by choosing the right loan product. Capital Float charges a flat 2% processing fee for all their loan products, and there are no other hidden charges. Another great benefit is the flexibility offered in loan repayment, which is linked to the business receivables.

Indeed, new age technology driven FinTech companies have eased the pain in procuring funds from the unsecured loans market in India, and small businesses can look up to them as a partner in their business growth.

At Capital Float, we fully understand the business challenges faced by small businesses and have therefore designed the unsecured loan products in such a way that businesses can focus more on business growth rather than on worrying about getting business finance. Our customised plans ascertain that you get just the right product that suits your unique need.

To find out the product that best suits your business, click here.

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What Is GST And How To Register For It

India is all set to implement the Goods and Services Tax, or the GST, from July 1, 2017. The intent is to standardise the indirect taxation system in the country, related to the supplies and consumption of goods and services. The new regime is one of the biggest indirect tax reforms pan-India, and one that will directly affect both business owners and consumers to a marked degree. It is thus important to know the whats and hows of the GST rollout.

What is GST?

GST is a new system for indirect taxation. Under this, a new four-tier tax structure has been finalised. Goods and services will be taxed under the slabs of 5%, 12%, 18% or 28%. The highest slab is for luxury items and items such as tobacco. The Union Cabinet has passed four bills for four different categories of tax regimes under the GST, as follows:

Central GST Bill: Applies to the supply of goods and services by the Central government within the boundaries of a state.

Integrated GST Bill: Applies to the supply of goods and services between different states, carried out by the Central Government.

Union Territory GST Bill: Applies to the supply of goods and services in the Union Territories.

The Compensation Bill: An allied bill that will govern the provision of compensation for revenue losses brought on by GST implementation, over a period of five years from implementation.

These four bills together are set to change the tax norms in the country.

Advantages of GST

The GST will prove advantageous at both seller and consumer levels. According to our Finance Minister Arun Jaitley, GST has the potential to boost economic growth by as much as two percentage points. From a business perspective, a number of pros are evident.

Greater compliance: The GST implementation will be reinforced by a backbone of robust IT systems and processes. All taxpayer services will be available online, making tax compliance and operations simple and transparent.

Uniform tax rates: This will ensure that tax structures and rates are common across the country, and will consequently make cross-locational business easier and quicker.

Reduce overlap: Often, a single product, for example, a shirt, being sold is taxed at various stages. With VAT, excise duty and other taxes payable at different stages, payments often roll up to large numbers, posing a cost to the company. The GST will facilitate the removal of different layers of tax levies and will replace them with a single, clear interface.

Cost advantage: Under the GST practice, many local Central and State taxes will be subsumed. At the Central level, the Central Excise Duty, Additional Excise Duty, Service Tax, Countervailing Duty and Special Additional Customs Duty will be subsumed. At the State level, we will see the following getting subsumed: State Value Added Tax or Sales Tax, Entertainment Tax, Octroi, Purchase Tax, and Luxury Tax, to name a few. These measures will reduce the cost of manufactured goods or services, thereby increasing the competitiveness of Indian goods in an increasingly global market.

The end consumer also stands to benefit from the following:

Better tax clarity and planning: Often, consumers are not aware of the taxes that they pay on the purchased goods or services, either due to the confusion caused by multiple indirect taxes or because the tax component is not revealed in the selling price. Such taxes may mask the real cost. GST will help streamline this by having only one tax applied from manufacturer to consumer, enabling tax transparency.

Lesser tax burdens: A single rollout across the nation is bound to bring in efficiency gains. At the same time, a transparent tax process with fewer hidden taxes will help reduce taxes for most commodities, leading to better affordability for the consumer.

The next steps for businesses: Applying for GST

Every business that is currently registered under any existing tax regime has to compulsorily migrate to GST. If your business is not registered under any tax regime, then you have to register for GST only if your aggregate turnover in a financial year exceeds a threshold limit of 20 lakhs liability for payment of tax (10 lakhs for North Eastern states).

If your business is happening inter-state or through e-commerce as an intermediary supplier, then registration is mandatory, even if this threshold limit is not reached. However, note that any casual taxable person or non-resident person is liable to register for GST even if they are not crossing the threshold limit.

Registration/ enrollment for GST is to be completed online under the GST Common Portal https://www.gst.gov.in/ for both taxpayers and businesses. This will be the platform for future filing of returns and tax payments. The government has also appointed GST Suvidha Providers to help with the process. There is no offline process for GST enrolment.

The enrolment is free. In order to log in for the first time into the portal, you must have your username and password that you would have received from the State VAT or Centre Tax Department (these are linked to your PAN). For further logins, create your username and password and begin the enrollment process.

These are the steps to follow for registration:

  1. Fill in Form GST REG-01-Part A, and key in the PAN number, mobile number and email address. The PAN will be verified online while the mobile number and email ID will be verified through the one-time password (OTP).
  2. The applicant will then receive an application reference number along with an acknowledgement of application through FORM GST REG-02.
  3. The applicant must fill the Form GST REG-01-Part B with the applicant’s reference number. The applicant must attach required documents: PAN card, documentation of company such as partnership deed, memorandum of association or incorporation certificate, proof of business such as rent agreement or electricity bill, cancelled cheque of company bank account in the account holder’s name, and proof of key authorised signatories such as list of directors or list of partners with their ID and address proof.
  4. If any additional information is required, the applicant will receive Form GST REG-03 as notification and must fill in and submit Form GST REG-04 within seven days.
  5. On submitting all details correctly, the application will be approved and the applicant will receive their registration certificate, called Form GST REG-06. However, if the application is rejected, Form GST REG-05 is sent to the applicant and they will be required to resubmit an application through Form GST REG-07, only if they need to deduct TDS or collect TCS.

This completes the registration process. It is followed by the issuance of a Provisional Registration Certificate (if approved), and thereafter, a final Registration Certificate that is expected to be issued within six months of the documents being verified by the GST authorities. Remember that different business verticals/locations need to be registered separately, as the registration certificate is generated separately for each.

Currently, the portal states that more than 60 lakh taxpayers have enrolled on the GST Portal between November 08, 2016 and April 30, 2017. Please note that the enrolment process has closed from May 1, 2017, and will reopen at a later date. Visit our GST blog to know more about GST and keep track of latest

Oct 24, 2018

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Impact of the Union Budget 2018 on MSMEs

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.

Operation Greens

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

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Impact of the Union Budget 2018 on Individuals

The Finance Minister, Arun Jaitley, announced the Union Budget 2018 on 1st February 2018 with components possessing the potential to have a transformational influence on various sectors of the economy. The current Indian economy has reached US$ 2.5 Trillion and is on its way to becoming the 5th largest in the world. GDP is projected at 7.4 % while the number of taxpayers has increased from 6.47 crores to 8.27 crores and a direct tax revenue growth rate of 18.7% has been achieved as of January 15th. The Union Budget is poised to leverage this upward trajectory and provide the impetus for further development at a macro and micro level. Many of the provisions in the Budget directly impact the daily life of a common man. This blog intends to dwell upon these provisions.

Health, Housing and Employment Receives a Major Boost

NHPS (National Health Protection Scheme) dubbed as the world’s largest government-funded healthcare program will be extended to provide up to ₹5 lakh towards hospitalisation for 10 crore families and ultimately 50 crore actual beneficiaries from underprivileged backgrounds.

Affordable Housing Fund (AHF) has been announced to ensure housing for all by 2022. Under this program, 51 lakh houses in 2017-18 and 2018-19 each will be constructed in rural areas with 37 lakh houses in urban areas.

₹40,000 crores worth of concessions were announced for senior citizens. The annual exemption limit on interest income from fixed and recurring deposit schemes including small savings instruments has been increased from ₹10,000 to ₹50,000 in addition to increasing the ceiling for Section 80D from ₹30,000 to ₹50,000.

To facilitate employment generation, Government will contribute 12% of wages to EPF for 3 years. The Finance Ministry has also reduced EPF deduction to 8% for women employees thus significantly increasing their take-home salary while maintaining employer contribution at 12%.

A Huge Fillip to Travel and Transportation – Growth and Modernisation

Travel and transportation received a huge fillip across roads, railways and civil aviation. ₹1,48,528 crores have been reserved for boosting railway network capacity and gauge conversion. Over 4000 km will be electrified in addition to redeveloping over 600 major railway stations and progressively equipping all stations and trains with Wi-Fi and CCTV. ₹17,000 crores have also been allotted for augmenting Bangalore’s suburban railway network. The Government will quintuple the number of airports to 124 and connect hitherto unserved 56 airports and 36 heliports under UDAN, the regional connectivity program.  Around 9000 km of highways will be completed by the end of FY 2017-18 and over 35,000 km of interior roads will be completed in Phase 1.

Digital India – Integrated Education and Research – Major Focus

Under the massive ₹3,073 crore Digital India Program, over 5 lakh Wi-Fi hotspots will be set up to provide broadband access to 5 crore rural citizens. This opens up an avenue for individuals in rural India to access formal finance from digital lenders via the internet. New centres of excellence in the areas of AI, Big Data, Quantum communication and Internet of Things (IoT) will be established to boost indigenous intellectual capital in these crucial areas. An additional ₹14,500 crores have been earmarked for strengthening telecom infrastructure including BharatNet. To harness emerging technologies, particularly 5G, an indigenous Test Bed at IIT, Chennai will receive ₹135 crores.

The Government has launched a new program RISE (Revitalization of Infrastructure and Systems in Education) funded by a non-banking financing agency HEFA (Higher Education Financing Agency) with ₹1 lakh crore. In higher education, under the Prime Minister’s Research Fellow Scheme, 1000 B.Tech students will be identified and facilitated to complete PhD at India’s prestigious institutes.  Up to 24 new medical colleges are to be started and upgrade of several existing colleges was announced to ensure at least one Government College for each state in India. Two new schools of planning and architecture will also be set up in addition to 18 more IIT/NIITs.

Personal Tax

On the personal income tax front, there are no new changes in income tax slabs or structure.  However, a standard deduction of ₹ 40,000 will be introduced in lieu of transport and medical allowances while a higher allowance will be allowed for disabled individuals. From April 1, 2018, long-term capital gains of more than ₹ 1 Lakh will be taxed at 10% though gains until January 31, 2018, and will be grandfathered. Dividends from equity Mutual Funds will now attract DDT to perhaps discourage investors investing in Equity funds primarily for dividends. In an effort to promote gold as an attractive asset class, the existing Gold Monetisation Scheme (GMS) will be made more investor-friendly and a network of regulated gold exchanges will be set up.

Balanced Budget

Though the budget was projected as agriculture-oriented and farmer-friendly, it is balanced and well-intentioned. Huge boost to expanding and upgrading transportation infrastructure especially the railways and supporting underprivileged with healthcare, housing and employment are the cornerstones of this Union Budget.  Substantial measures in the areas of digital economy and education pave the way towards India becoming an economic superpower.

Oct 24, 2018