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5 Things to Know About Short Term Business Loans

If you are planning to embark on a new venture or are already running an enterprise, knowing all about short-term loans will serve you well.

Money plays a crucial role in your entrepreneurial journey, determining the size and scope of your business. After all, when you are brimming with ideas to cater to a market need, the last thing you want on your hands is a financial concern that could result in a compromised business opportunity.

Fortunately every problem has a solution and financial solutions for businesses come in many forms.

Reach out to experts

Should you require commercial finance, a short-term business loan could prove to be immensely useful. Wondering what exactly short-term loans are? You could ask friends who have applied for one, or approach specialized financial companies like us. You would be better placed to know more about short term business loans before applying for one. This is particularly useful if you are venturing into business for the first time as a small entrepreneur.

What is a short-term loan?

The simplest way to understand the concept of a short-term loan is to think of it as a business loan that provides immediate working capital to your company. You are given a lump sum amount that you have to repay within a period of one year, or up to five years at most. This is in contrast to other loans which can be repaid over a longer term.

Financial experts say that a short term business loans hold the potential of making or breaking your company. As per a study, conducted by the National Small Business Association, 19% of small business owners cite lack of available capital as the major challenge in their growth, and 82% of businesses fail due to improper management of cash flow.

Given its importance to small businesses, let’s take a quick look at the implications of a short-term business loan.

Factors to keep in mind

Short-term loans are easier to obtain as compared to long-term loans. You can avail of them in the alternative finance market through online lenders, and thus you can completely bypass the slow and cumbersome conventional lenders like banks. These loans are less tedious to get as they have a shorter list of qualifications and lesser paperwork. But you also need to repay them faster, usually within a year. If you manage to raise your profitability in the short term, this can be comfortably achieved.

However, there are certain points that you need to keep in mind while applying for a short-term loan. The interest rates of short-term loans are relatively higher in the commercial finance segment. Thus, it’s advisable for you to go through and understand the total cost of the loan before applying for it. Short-term loans often demand frequent payments from you. In case you don’t have regular/stable cash flow, you may find it difficult to repay your loan with weekly payments.

To help you further, here are five things you should know before applying for a short-term loan.

  1. Be clear about the purpose: Having a clear purpose is the pre-requisite for exploring a short-term business loan. It’s of utmost importance to be crystal clear as to the purpose of the loan—to hire new talent, expand your supplier network, invest in technology etc. If the purpose is not clear, the loan amount could well be frittered away on incidental expenses that can hold back the progress of young companies. Analyze in detail if the short-term loan is going to work for you in your current situation.
  2. Have an operational plan: Have a clear business strategy in place before securing a loan from a financier. It’s crucial to have a strategy that optimizes your resources. Without a proper business plan/strategy, it’s likely that you are going to find yourself in a debt-trap.
  3. Research interest rates and overall cost: Interest rates are an important part of any loan. It’s a smart move to know the interest rates on your dream loan early on, along with the other charges/fees that your lender may levy. A fee would not cause an increase in your interest rate, but it will be a part of your monthly payments.
  4. Calculate risks: As a wise entrepreneur, it is crucial that you carefully weigh all the possible risks before arriving at any decision. Analyze and ask yourself questions like: Will this loan help me in reaping the benefits? Will it generate regular cash flow? Will I be able to repay my loan in regular weekly or monthly payments?
  5. Know your loan duration: Apart from calculating all the risks, and having the strategy in place, it is important to know the duration of your loan and to choose the repayment tenure wisely. You can choose a slightly extended period, keeping risks and emergencies in mind, instead of choosing a short tenure.

Take a leap of faith

We understand that the journey of any venture, especially of a small business, is not an easy one. It takes a lot to take your business to a certain level and when issues like finances become a hindrance, one is likely to lose hope. But remember, today’s new age financial solutions offer a timely respite. Yet, you need to have an analytical and calculative mind, which can understand the pros and cons of the loan in order to leverage it fully.

If you are still in a dilemma, wondering how to get loan for your business or are unable to decide if a short-term business loan suits you or not, we, at Capital Float would be more than happy to assist you.

Oct 24, 2018

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5 Reasons Why Making a BizResolution Can Help You Grow Your Business

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Having got off to a good start, a business typically aims to grow and explore new opportunities. To make this happen, businesses need to move in the right direction. This is especially true for a business in its early days when managing operations efficiently is a challenge, thereby taking precedence over matters of strategic importance such as goal-setting and business development. One way by which you can change gears from the routine rigmarole is making a #BizResolution. These are exactly like making New Year Resolutions, except that these will help you boost business growth in your enterprise.

A business resolution is like a promise or commitment you make to achieve specific objectives in the coming year. Since it involves your enterprise, the level of commitment to making it happen is high.

Here are 5 ways business resolutions can help drive growth in your business. Business resolutions can help:

Set realistic goals: While your company is being steered by a sound business plan, it is critical to break down broad business objectives into achievable goals. So, while your plan projects a specified growth rate, you need to identify smaller goals that will lead to this result. For instance, your #BizResolution could be to “improve relationship with suppliers,” which will have a positive effect on inventory, product availability, and therefore customer satisfaction and higher sales.

Drive business strategy: It is common for new entrepreneurs to get lost in the operational hassles and simply not have the bandwidth to focus on more value adding tasks such as digital marketing or human resources. The urgent matters take precedence over what’s important, and the business slows down for want of strategic inputs. In this case, a #BizResolution can pinpoint to strategic focus areas, thereby helping realign the business priorities for growth.

Upgrade skills: Running a successful business is a constant learning process, which involves learning from competition, adopting best practices, upgrading skills and so on. This is a must in today’s rapidly changing environment, which demands that companies constantly innovate. Yet, somewhere in this quest for efficiency, the learning element takes a backseat. Having a skillset-oriented business resolution can help foster a culture of continuous learning and skill upgradation.

Focus on expansion: A high-growth focus is what most investors look for before investing in a new business. To expand, you need capital for which enterprises usually need investors or lenders. Hence, you must assess the potential for new markets, new partnerships, complimentary product categories (upselling and cross-selling), new channels (online), and new customer segments. Making such growth-centric business resolutions will keep you firmly on the road to expansion and success.

Develop a niche product: A niche product builds on the premise that certain small market segments are typically underserved. Find your blue ocean strategy and explore a better chance to grow. Make a #BizResolution to invest time and effort into a promising, niche product, which allows you to differentiate your offerings and create an uncontested market space.

Business resolutions need not be yearlong commitments. Periodically assess your product or solution with respect to the industry environment and change tack—set new objectives or redraft your existing ones. The idea is to stay in tune with emerging opportunities and align your company with market needs to make the most of growth prospects.

Create your #BizResolution today and share it with us to stand a chance to win exclusive prizes such as: Exclusive tickets to a T20 cricket match in your city Amazon vouchers Click here to get started.

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Oct 24, 2018

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All You Need To Know About Unsecured Business Loan for Traders

It takes money to make money.” We often hear this adage in the business world, and it does hold true. Even so, maintaining adequate cash reserves to meet the fixed and variable costs can be a real challenge, especially for start-ups and small businesses.

Most of the small and medium enterprises (SMEs) initiate operations with a low level of funds while simultaneously facing competition from established players and dealing with the challenges of seasonal cycles. Consequently, they may not be able to generate the estimated sales volumes.

Even if a venture is performing as per expectations, it may need to make additional investments to hire qualified experts, adopt new technologies and maintain larger stocks of materials/inventory for sustained progress. With experience, SMEs know that a cash cushion is necessary for both survival and growth. An Unsecured Business loan for Traders best offers this advantage.

The Challenge

There are multiple sources of an SME loan for small enterprises, and sincere business borrowers approach a financial institution only when they are confident about and can prove their venture’s ability to pay back in time. Nevertheless, a high number of applications get rejected because these borrowers are unable to pledge financial assets as collateral against a loan.

Not everyone owns huge property. New entrepreneurs often start their operations from rented premises and may not have any significant assets to hypothecate. A secured business loan for traders can also be denied if the lending institution does not deem a particular asset to be valuable enough for the funding.

Solution for Cash Crunch in Business

The Solution

What comes as a relief for business owners is the fact that an unsecured SME/MSME loan is a prominent option for finance, and it comes at significantly more customized terms.

As the digital revolution continues to transform the lending industry, the possibilities of quick funding have only increased for small businesses, and there is an array of SME loan products available to them. A digitally operating FinTech company offers term loans that can be used to buy new premises (shop/showroom/office) or expand the business to new locations. Entrepreneurs can also apply for a working capital loan to continually fuel operations in the low phases of the business cycle.

Moreover, FinTechs offer loan to buy stocks. This facility is particularly helpful for customer-facing ventures such as retail and restaurants.

What is common to all these FinTech credit products is that they are unsecured loans – they can be taken on short notice and without pledging any asset as collateral.

How to apply for a business loan for traders ?

A majority of new-age business managers now understand the lending models of FinTech companies. Those who are still unaware of the concept can always do a quick online search to comprehend it. In brief, a FinTech lending company typically is a non-banking financial company (NBFC) that uses digital technology to make financial solutions quicker to access.

A business loan for traders is highly sought by small enterprises. Any Pvt Ltd (private limited company), LLP (limited liability partnership firm) or Sole Prop (sole proprietary company) can approach FinTech lenders for unsecured business loans.

While the exact eligibility criterion differs as per the kind of SME loan applied for, the principal requirement is the operational business history of at least one year. Pursuant to the rules of the money market, this stipulation is necessary to show that the business owners are genuine and have been running the company for some time.

To qualify for the requested amount, a business with active operations should also show its commitment towards tax compliance. It should also have a precise idea of its loan requirements. This not only helps the borrowing organisation to increase its chances of getting an approval for the credit, but it also makes it convenient to choose the right type and term of the loan.

Anyone applying for a business loan for traders should understand the cost of the loan upfront. When a FinTech is approached for such an investment, this cost includes the interest rate and a nominal processing fee that is usually less than 2% of the borrowed amount.

The application process is entirely digital, and that makes it shorter than the overwhelming procedures of visiting a traditional lender, printing multiple copies of documents and then staying in suspense for weeks to get the required amount.

Applying for a loan from a digital platform takes less than 10 minutes, and the application formats are available on the secure website of the FinTech lender. The application form usually comprises of some basic questions to evaluate the eligibility of the business for a loan. These questions include years in operation, average annual/monthly revenue, tax payments and past credit history, if any. Digital uploads of the relevant documents support the information.

There is no waiting game when a business applies for a loan from a FinTech lending company. As soon as the application is submitted, its evaluation by customised algorithms begins, and it may then be sent for a quick manual review.

FinTechs notify the borrowers of the decision on the application on the same day. If the decision results in an approval, they disburse the total approved amount in the next 2-3 working days. The amount is credited directly to the business bank account, and the SME can withdraw the necessary sums to fund the operations/stock purchases as required.

How to pay back the borrowed amount ?

Most loans are paid through equated monthly instalments (EMIs), and the same method can be used to repay a FinTech SME loan. To make this process more convenient for their borrowers, some companies give them the flexibility to vary the instalment amount when required. As soon as the business records reflect better revenues than the estimations, it can pay off the loan in full and save the trouble of managing EMIs for the complete schedule. The prepayment penalty charged by a FinTech is still less than that of banks and traditional NBFCs.

Is your business facing a cash crunch? Do you want to move to the next level of growth or invest funds to start operations at a new location? Capital Float is a friendly FinTech lender that is trusted by businesses in multiple industries. From term loans and working capital loans to funds for specific domains such as medical practice and online selling, we provide an array of credit products tailored to the needs of business owners and self-employed professionals.

Growth of revenue for traders

 

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To know all about the loan that you seek and the amount that you can borrow, feel free to call us at 1860 419 0999.

Oct 24, 2018