Impact on Retailers in India after 2018 Union Budget

The Union Budget for FY18-19 was much anticipated, owing to reasons more than one. The first full-fledged financial plan after the introduction of GST and the last one by the Narendra Modi-led government, the most significant event of the Indian financial year is over. With the national polls looming in, the Union Budget rolled out by finance minister Arun Jaitely was favourable towards agriculture, rural development, social infrastructure and digital transformation. However, international mobile phone companies, bond investors, equity servicing institutions and the defence sector are at the not-so-advantageous end of the spectrum. In general, this year’s Union Budget has been a shift from the typical stance of the government that all segments need equal attention.

An industry segment that sees clear growth opportunities is retail. Amidst public opinion that the budget had not mentioned the retail segment, the various provisions have subtle repercussions that will help widen the scope of consumption. Consequently, this will have a long-term impact on retailers, where they can reap benefits from consumers with a higher expendable income.

Here are the key provisions of the Union Budget for FY 18-19 that have relevant implications for retailers.

  • Reduction in Corporate Tax
    With regards to taxation, the budget has declared a reduction in corporate tax to 25% for companies with an annual turnover of up to Rs 250 crore. This accounts for almost 99% of the companies in India and would have an impact of Rs 7000 crore on government finances. As only 250 companies have a turnover above the threshold value, this is a significant reduction in terms of the business turnover cutoff of Rs 50 crore that had been announced in last year’s budget for the same tax bracket.
    This move has resulted in a decrease in the tax burden for small and medium businesses, who can now use these additional funds to purchase inventory or machinery, expand their premises, hire new employees or for marketing activities. In case it does not cover your entire expenses, retailers can also avail easy business finance from digitally-enabled FinTech lenders who provide customized credit products like Merchant Cash Advance.
  • Increased Investments in Digital India
    Lack of investment in digital infrastructure by the government has always been a pain point that has deterred the productivity and development of startups and small businesses. This is especially true for the e-commerce sector, as rural India is the driving force behind its growth. This year alone, e-tailers recorded a three-fold increase in the number of shoppers in small towns compared to metro cities.
    Under the massive Rs 3,073 crore Digital India Program, over 5 lakh Wi-Fi hotspots will be set up to provide broadband access to 20 crore rural citizens in over 2,50,000 villages. This opens up an avenue for individuals in rural India to harness the Internet for trade, banking, logistics and even to avail formal finance from digital lenders. E-commerce retailers can use this opportunity to its fullest, as 55% of the 185 million active consumers are predicted to be from rural India by 2020.
  • Changes in Personal Taxation
    A welcome move for the salaried middle class, this budget proposed a standard deduction of Rs 40,000 for transport allowance and medical reimbursement. While this may seem irrelevant to retailers, the impact of this allowance does indeed affect them. As personal income increases, so does the disposable component. Consumer behavioral studies ascertain that the disposable income is equitable to spends on retail. Thus, the re-introduction of medical and travel benefits is a favourable budget impact on retailers.
  • Refinancing for MSMEs
    The micro, small and medium enterprise (MSME) sector plays a major role as India progresses towards becoming one of the biggest economies in the world. Despite contributing a staggering 15% to the country’s GDP with a high market share of 40% towards employment, these businesses have an unmet credit demand of $ 400 billion.
    Acknowledging the fact, the budget declared an allocation of Rs 3794 crore to the MSME sector for credit support, capital and interest subsidy on innovation. With this reform 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. This impact of the budget on retailers opens plenty of avenues avail formal source of finance in a timely manner.
    A unique Aadhaar-like identity for each enterprise will also be implemented for streamlining business identity. This measure can further enable Fintech lenders like Capital Float to process eKYC of enterprises swiftly and offer working capital finance in a matter of seconds.

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Why is GIFF the Best Time to Take a Loan?

The second half of every year brings with it a large number of festivals. As consumers wait with heightened excitement for significant festivals to roll into their calendars, SMEs prepare for the season by adding to their product lines and offering sweeping discounts on their offerings. To support SMEs all over India in their preparation for the season, Capital Float introduced the ‘Great Indian Finance Festival 2017’ – a one-of-a-kind business loan bonanza.

What is GIFF?

The Great Indian Finance Festival (GIFF) is a loan festival designed exclusively for SMEs like you to help steer your business towards growth. From 1st July to 30th September, Capital Float, the largest digital lender in India, brings you unique deals for financing your business. Our timely processing, low interest rates and great offers will assist SMEs like you focus on fuelling business growth while we take care of the financial requirements.

Timing is Everything

SMEs may be aware of the nature of credit they are seeking, however the timing of availing the loan is usually outside of their control. Factors such as seasonality, market trends and lender’s turn-around-time could affect the timing of availing a loan. Through GIFF, Capital Float attempts to provide SMEs like you quick access to customized working capital loans ahead of the festive season, in order to help you prepare for the peak in consumer demand.

GIFF becomes the best time to take a loan because you can:

  • Cash in on festive buying frenzy: Mid-year marks the beginning of the festive season in India, with most Indian festivals such as Ganesh Chaturthi, Onam, Durga Puja, Dussehra and Diwali falling in the second half of the year. Festivities are widely associated with new purchases and bargains, and business owners must not miss this opportunity. Whether it is expensive gifting in Diwali or home renovation before Ganesh Chaturthi, consumers are prepared to spend. Timing is everything and you need to be ready for the surge in demand to make the most of the festive season. This is where the Great India Finance Festival will help you. At GIFF, you can borrow funds at low interest rates, improve or scale up your portfolio and pass on the cost benefit to your consumer.
  • Get an auspicious start: Several festive occasions in India—for example, Onam—are considered an auspicious time to start something new. This traditional belief adds an air of positivity and encourages SMEs to engage in fresh business initiatives. GIFF further aids by offering lucrative deals to SMEs looking to make the most of these opportune occasions.
  • Save on interest: If you are penny-wise in business dealings, the subsequent savings will directly enhance your cash flow. The Great Indian Finance Festival offers innovative and affordable finance products at low interest rates starting at 16%. Since collateral-free, quick loans are usually available at higher rates of interest, GIFF is the perfect opportunity to avail of customized loan products for different working capital needs.
  • Earn in Gold: To add to the rare loan opportunity that GIFF brings you, Capital Float offers lucrative rewards on loans availed during the season. You get to earn Gold up to ₹10,000 on the loan offering featured during Flash Sales. Keep checking our GIFF page or follow us on Facebook and Twitter to find out the dates of Flash Sales.

Capital Float’s Great Indian Finance Festival can help you make new business headways this festive season. Create a solid foundation with the best financing deals on offer, and push your business towards greater heights with GIFF.

Oct 24, 2018

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Here is How Unsecured Loans are Different from Secured Loans

Adequate funding is a pre-requisite for any business. Whether a project is at its initial stage or in the development phase, it needs ample financial backing to keep up its growth momentum. However, finding adequate funding can be a challenging process despite the market now offering a wide range of alternatives to traditional sources of finance.

In their search for funding options, start-ups and small businesses often stand at crossroads where they must choose between secured and unsecured loans. On the surface, both look “equally attractive” with their respective advantages. Borrowers are frequently perplexed as to which should be their final choice.

It is therefore important to delve more deeply into these two broad categories of loans and compare their costs with the benefits they bring. Businesses must also be aware of their own financial situation to understand clearly which loan option they will be eligible for.

Let us first understand the basic concepts of secured and unsecured business loans in India.

Secured Loan

A secured loan is always backed by assets. While applying for such a loan, the business must own something of measurable financial value, which can be offered as collateral to the lending institution. This could be an immovable property (a plot of land with or without construction), gold, a valuable investment portfolio, or any other asset that can be liquidated. Businesses can also extend their machinery, raw material or inventory stock as collateral.

The collateral has to be pledged to the lending institution. This implies that the lender will hold the title/deed to the collateral until the loan is fully paid off. However, the borrower retains the ownership of the asset and will continue to enjoy benefits accruing from it.

If the borrower fails to pay off the loan in the stipulated time, the lending institution has the right to take over the possession of the collateral and sell it to recover the outstanding debt amount. Typically, with secured loans, the end use of funds borrowed is pre-determined.

Advantages of secured loans

Borrowers are often lured to secured loans in the hope that they will be able to procure a larger loan amount than what unsecured loans can offer. The longer period available to pay back the borrowed sum is also a perceived advantage.

Another apparent benefit of these loans is the lower interest rate charged on them. This is based on the rationale of lesser risk involved, thanks to the collateral that can be sold off by the lender in case of payment defaults.

THE CAUTION – What must also be remembered is that some secured loans can have very high interest rates. There are financial agencies that charge the highest legal interest rate for business loans despite taking collateral from the borrower. Reading the fine print carefully is always recommended. In some cases, a low interest rate can also be a promotional or limited period offer that may be withdrawn after a few months.

In addition to non-banking financial companies (NBFCs), nationalised and private banks also offer secured loans to businesses, but the banking penetration in India is still low. This prevents several small and medium enterprises (SMEs) from obtaining a secured loan at a reasonable interest rate.

Another common disadvantage of secured loans is that the process of getting approval is longer and calls for more paperwork than an unsecured loan.

This brings us to the second business loan category.

Unsecured Loans

An unsecured loan is not backed by any collateral. It allows the borrower to get funds without having to offer any asset as guarantee to the lending institution. Generally, unsecured business loans come with a fixed term and fixed rate of interest.

Unsecured loans are offered based on the credit worthiness of the borrower. For an enterprise, the eligibility can be gauged in terms of years in business, its annual turnover and the primary location (city) from which it operates.

The tenure of these loans is often shorter than the long-term loans granted by banks. Most nationalised and private banks approve loans for SMEs with a payback tenure of not less than one year. NBFCs can offer immediate loans for shorter periods. At Capital Float, unsecured small business loans are offered for a tenure of one to 12 months. This gives the borrower the advantage of securing quick funds for sudden needs. Once the project begins to reap returns, the business can pay off the loan and thus avoid paying interest for prolonged terms.

Advantages of unsecured loans

When a business requires only a small amount, an unsecured loan is a better alternative than a secured one, especially if the business does not want to expose its financial assets to the risk of repossession. Also, those companies that do not possess sufficiently valued assets for the amount they require can find easy access to working capital finance with unsecured business loans.

Such loans also act as a good source of funds for companies that are already trading. Since the loan is unsecured, the lenders decide upon its amount by simply assessing the trading position of the business. Background checks are performed on credit history, cash flow position, cash reserves and balance sheet.

Unsecured business loans are quicker to obtain than secured loans. We provide funds to our clients within 3 days once they submit the necessary documents and clear the eligibility criteria. As against this, private banks take more than two weeks in forwarding the grant, while public sector unit banks can take 4-6 weeks for the same.

If your business needs immediate financial support and you are hesitant to offer any collateral to the lender, unsecured business credit will work for your best interests. By choosing Capital Float as your trusted finance partner, you are assured of a quick digital process to submit your application. The entire loan disbursal process is completed in three simple steps, given below:

  • Upload the minimum required documents on our website
  • Receive approval in minutes if your paperwork makes the business eligible for loan
  • Get the funds within next 72 hours

Do not let the long-drawn processes of conventional funding delay the pace of your venture’s development. In the digital age, unsecured corporate loans can conveniently help you accelerate your business growth.

Oct 24, 2018

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Why Online Vendors Should Apply for Capital Float’s Online Seller Finance

Are you an online seller looking to optimize and grow sales? Given the highly competitive nature of e-commerce, it’s always advisable to have a cash flow option handy for successful expansion. Furthermore, you wouldn’t want to lose out on market opportunities due to the lack of convenient financing options. And that, is where Capital Float comes into the picture.

In the cut-throat world of e-commerce, having a lucrative financing option at the right time is likely to translate into a significant competitive edge. There are three key occasions, wherein, an online seller may require rapid financing:

  • Respond to an increase in sales by purchasing inventory
  • To be prepared for seasonal fluctuations in revenue, and bridge short-term gaps in liquidity.
  • To widen product portfolio by diversifying into other product segments or to widen reach by operating on a new marketplace

Here are a few compelling reasons as to why you must apply for Capital Float’s Online Seller Finance to maintain your competitive advantage in the business:

  1. Flexible loans that are customized to your need

The exciting features at Capital Float’s Online Seller Finance ensure speedy expansion for your business in a simple manner. As an e-commerce vendor, you can raise funds from INR 1 Lac up to 1 Crore, depending upon your cash requirements. Furthermore, we provide you with effortless repayment modes for a loan tenure between 90-180 days. Our partnerships with multiple, leading e-commerce platforms enables you to acquire our e-commerce seller loans to operate and expand across different online marketplaces.

  1. A quick, hassle-free process

        a) Minimum documentation

To apply for our eCommerce seller loans, you need not furnish a heavy stack of documents. All we would need from you are your bank statements of the last six months and KYC documents credentialing you and your business.

         b) Zero collateral

We provide unsecured loans, meaning we don’t take collaterals as guarantee for loans. You won’t be asked to pledge your property or vehicle to avail a loan from us. Our loans are bereft of the anxiety that are often associated with loans against collateral.

        c) Loans against marketplace sales

Our motto is to help businesses to ‘Break Limits’. We understand that many a time, businesses with potential are hampered by the lack of finance. We are committed to change that. You can avail Online Seller Finance on the basis of your proven sales on e-commerce marketplaces, receiving up to 150% of your average monthly sales.

  1. Apply anywhere, any time

While financial institutions like nationalized banks, private banks and traditional NBFCs not only take weeks to sanction a loan, but they also have tedious application procedures, Capital Float ensures immense flexibility in the process. We have designed a handy mobile app through which you can apply for a loan from anywhere, as long as you are connected to the internet. The four-step online application procedure is not only user-friendly, but allows you to raise funds without losing on precious time.

External financing is an excellent tool for you to grow as an online vendor and keep operations smooth. Capital Float’s sole aim is to bridge the current gap in the market with innovative and flexible credit products for online enterprises like yours. That said, Online Seller Finance is just the product you need to fulfill your finance requirements in a smooth, hassle-free manner.

Wait no more. Take your online business to the next level with our online seller loans. Click here to apply.

Oct 24, 2018