A start-up that takes off well with its business idea gradually strategizes about other plans to cement its growth. However, despite a fair degree of success, these small and medium enterprises (SMEs) can face a shortage of funds to fuel their progress.
The business revenue that helps to pay employees, purchase raw materials, maintain the premises, meet other expenses and even make profits may not be enough to invest in further growth. Fortunately, there are business loans that come to the rescue of enterprising organisations at this time. These are provided by banks, non-banking finance companies (NBFCs) and private money lenders.
This article answers some of the frequently asked questions (FAQs) on unsecured and fast business loans offered by NBFCS with a digital lending model. They are also referred to as FinTech companies and are being increasingly approached by startups who find their lending policies more flexible than those of conventional sources.
What is a business loan?
A business loan is a form of financial support that helps commercial organisations to keep up with their growth plans. It is particularly valuable for micro, small and medium enterprises that start their operations with a low level of funds and may not have a substantial amount of funds to invest in bigger initiatives. These include the purchase of new machinery/equipment, adding more product lines, upgrading product features, starting the business at a new location or any other activity that will improve and develop the enterprise.
Is it really a good idea to take a business loan? Won’t it be an additional burden in books of accounts?
Any loan is a liability in accounts. However, when a business takes credit for productive purposes, it can also afford to pay it back with the revenue generated by intelligently channelizing the funds. When there is an attractive business opportunity, and it merely needs some financial investment, the required funds can materialize in the form of fast business loans offered by a FinTech lending company.
If the business procrastinates, the amount required in investment may increase with time, or the opportunity may completely vanish. It is, therefore, better to borrow the funds from an institutional lender and take advantage of the opportunity when it is available.
Thanks to the flexible repayment policies of FinTech lenders, the debt can be cleared before the scheduled term of the loan.
How to apply for a business loan? Does an MSME need anything, in particular, to apply for these funds?
Applying for a loan at a Fintech lender is a simple process that takes less than 10 minutes. The application is available online and asks for basic information of the and the enterprise in question. An MSME should have been operating in its industry for at least one year to be an eligible borrower.
The details provided in the digital application need to be substantiated with corresponding documents. This stipulation, however, does not require the borrowers to send any printed copies of the papers to the lender’s office. They only need to scan the necessary documents and upload them as PDFs with the application.
What are the documents required for a business loan application?
A FinTech lender typically asks for minimum possible documentation. It simply wants to verify the credentials of the prospective borrower and make sure that the business has been operating in conformity with the tax regulations and statutory laws of the country. Generally, the required paperwork include:
- Photo IDs and KYC documents of the business owners
- Latest ITR/GST returns
- Business bank account statements for the last six months to one year
The loans provided by a FinTech company are often tailored based on the amount approved, the term of the loan and the purpose of the loan. At times, borrowers may be required to submit a few additional documents . They can find answers to queries such as ‘how to apply for working capital loan’ or ‘how to apply for machinery loan’ on the company’s website. For more details, they can call the customer service team and get the exact list of documents pertaining to their loan.
How long does it take for a business loan to be approved?
In addition to ‘how to apply for business loan’, a frequently asked question on this subject relates to the time within which the finance is available for use.
It usually takes between 1-6 weeks to get a business loan from private and public sector banks, while it only takes three days when such funding is availed from a Fintech lender. Due to the digitized application and document submission system, it does not take long to review the details and provide a decision on the requested funds. For every approved application, the money is deposited in the business bank account within 2-3 business days.
How much loan can a business get from a FinTech lender?
This depends on the individual requirements and the purpose of the loan. While the range of available credit from a FinTech lender can start from five lakhs and go up to a crore, it is recommended that the borrowers have a near-precise idea of the sum that will help them to fulfil their requirement.
Some businesses apply for only a part of the total required sum and make the remaining investment from their savings. Keeping the loan amount on the lower side is a sound way to avoid paying unnecessary interest. Similarly, borrowing a lower amount may result in the SME falling short of funds at a later stage. SMEs must evaluate their credit needs as closely as possible while applying for a loan.
Nevertheless, FinTech lenders do not turn down requests for ‘big amounts’ once they have verified the earning capacity of a business and are confident that the borrower would not default on repayments.
A FinTech company may also offer an eligibility calculator to help the potential borrowers calculate the maximum amounts they can borrow. Such a calculator takes business earnings, expenses and its operational history into account to compute the borrowable funds. Capital Float understands the anxiety of a business that wonders ‘how to apply for business loan without collateral’? We know that many SMEs are unable to get the loan they deserve due to lack of financial assets to pledge as collateral. This is why we offer only unsecured business loans.
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Your enterprise qualifies for our funding if it has a minimum operational history of one year, has been earning reasonable revenue throughout its tenure, has a sound credit history and is compliant with the laws of the land. To know more about fast business loans and for queries on any specific working capital loan, please call us at 1860 419 0999. You can also meet us in person by scheduling an appointment.
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There are multiple stages in a start-up. At an early stage, most tech start-ups usually include two founding members – a business head and a tech head leading the validation efforts. Further down the line, we notice parallel and vertical streams of teams leading the initial growth of the company. It’s usually at this stage or after this stage, where the business has some solidarity to it and the focus on building tech for a large and scalable model begins. The following points made in this post have been laid out in view of a mature start-up.
Following an agile methodology for development is a no-brainer for any start-up. The environment is fast paced, catering to a dynamic business where release cycles are frequent. Often, the common pitfalls of this method also show a lack of emphasis on planning and documentation while customer expectations sometimes are not clear. To mitigate this, a hybrid of agile and waterfall approaches enables start-ups to move towards a mature business. To do so, the start-up must;
– Identify problems of the business
– Prioritize the need of the hour for the business
– Allow for high level architected solutions for each problem
– Build feature specs
– Execute in sprints (ideally 2 weeks) for maximum output to customers
Your business logic and data is your Intellectual Property. As a Fintech company, this becomes the most critical piece of software development. It is important to protect your data while also facilitating growth with the exact same data. How do you draw this balance?
Build your logic and algorithmic layer around your data and an external layer that does not directly interact with your data set. This permits external endpoints to be consumed by growth partners as well as reduces development efforts for building tech for internal teams.
Enterprise applications are often built using a monolithic approach or as a single unit. Although it’s a natural approach to development, it can be frustrating because of multiple dependencies on modular structure and deployment to the cloud also becomes a challenge.
In contrast, Micro-services architecture equips you to independently deploy services or pieces of software without large dependencies on other services. These services or pieces of software ultimately add up to become a single application while running its own suite of processes and mechanisms.
Additionally, in a Fintech setup, technology is built to cater multiple teams – both internal and external and having a micro-services architecture easily allows horizontal scaling.
In a start-up, it’s a good idea to prototype development. Prototyping facilitates quick delivery of a piece of software and a better understanding of future product development.
Post prototyping, it’s important to pick the right framework for a full-fledged and scaled application. This is where building code that can be re-used in multiple services becomes a factor of efficiency in development. Building custom libraries (back-end or front-end) and even choosing the right frameworks ensure ease of development across resources and knowledge transfer. A choice of using AngularJS as a front-end framework allows for creating directives specific to custom applications and promotes reusable components.
Build vs Buy
A classic point of debate and contention is always build versus buy. There are multiple points to consider while making such decisions in a growth stage start up to create a fine balance between the two.
Often, out of the box or integrated solutions provide quick solutions for increased productivity to a business need but come at several costs, such as pricing and rigidity of use. Sometimes these solutions are not compatible with existing software or custom solutions.
Custom-built solutions provide competitive advantages, builds intellectual property and fit a specific business need but also comes at several costs, such as time for development and uncertainty in product definition.
A hybrid approach can be an effective way of mitigating the disadvantages of build or buy approaches. At times, building on top of or integrating an existing product into your custom built solution adds greater value to the overall business product. An example of such a solution can be integrating a good workflow management tool into your custom CRM application.
Oct 24, 2018
The new Goods and Services Tax (GST) is a unified tax structure that was implemented by the Government of India on 1 July 2017. The new regime has ushered a significant change in taxation levels and rules associated with it. On an average, we see the tax slab increasing from 15% to 18% for most of the services. While this may translate to higher cost of services to the end consumer, GST also presents a whole lot of opportunities, pushing ease of business.
Services Sector in India: An Overview
India is a strong services-led economy with the sector generating a significant chunk of employment opportunities and contributing to the GDP. It contributed around 66.1% of India’s Gross Value Added (GVA) growth in 2015-16, is the biggest magnet for Foreign Direct Investment (FDI), and an important net foreign exchange earner. Some of the core areas of service are IT and ITES, banking and financial services, outsourcing, research and development, transportation, telecommunications, real estate and professional services.
Some of the positive impacts of GST on service providers are:
Clear distinction between goods and services: The old regime does not clearly distinguish between goods and services, leading to many instances of double taxation. For example, software is often treated as a good and as a service. The new regime clearly distinguishes goods from services, and also defines principal supply, composite supply, and mixed supply separately. For example, when an individual books a Rajdhani train ticket which includes meals, it involves a composite supply wherein the ticket and the meals cannot be sold separately. Since the transportation of the passenger is the principal supply, the rate of tax will only be charged on the ticket. Alternatively, for items that can be sold separately, but are sold together, like a hamper of snacks and aerated drinks, the rate of tax applicable on the higher product will be levied on the composite supply. There are also separate definitions for supply of software, works contracts, and leasing transactions to bring in more clarity and transparency on their taxation rules.
Streamlining of taxation for intra-state service providers: Due to the state level taxes being subsumed, it will become easier for service providers that operate within the state to know their tax obligations better. Such companies can move away from multiple tax calculations. For example, a CD with software incurs Excise, Service Tax, and VAT under the old regime; this is simplified to one unified rate under GST, making tax calculations and administration easier for intra-state service providers.
Input credit facility: VAT payment under the old regime was not eligible for setting off against output liabilities. The input credit facility is now made available to service providers as well, wherein tax paid on any inputs can be claimed and adjusted against tax paid on output. This will result in direct cost savings for service providers and may even offset the expected rise in end pricing. For example, an AC fitter who paid tax on the raw material for AC fittings (pipe, tape, solder etc.) will be able to claim that tax, and end up spending less on the cost of fitting the AC. This cost advantage can spill over to the customer as well.
Regularised return filing: The old service tax system required two half-yearly returns for services businesses. Under GST, this has been replaced by a number of returns provisions, depending on the type of taxpayer and the type of business:
|Return||Type of tax payer||Timeline of filing return|
|GSTR 1||For outward supplies of sale (for registered taxable person)||By 10th of the next month|
|GSTR 2||For inward supplies received by a taxpayer (for registered taxable person)||By 15th of the next month|
|GSTR 3||Monthly return for registered taxable person (except for Compounding Taxpayer)||By 20th of the next month|
|GSTR 4||Quarterly return for Compounding Taxpayer/Composition Supplier||By 18th of the next month|
|GSTR 5||Periodic return by Non-Resident Foreign Taxpayer||By 20th of the next month|
|GSTR 6||Return for Input Service Distributor (ISD)||By 13th of the month succeeding the quarter|
|GSTR 7||Return for Tax Deducted at Source (TDS)||By 10th of the next month|
|GSTR 8||Annual Return for e-commerce operator||By 10th of the next month|
While a shorter timeline for filing returns might seem overwhelming, regularisation in return filing will result in better streamlining of taxes. Since all these returns are required to be submitted online through a common portal provided by GSTN, the process is simplified and will help the government weed out regular defaulters. This in turn will result in a major boost in the contribution of the Service sector to the GDP.
Service providers, however, are concerned about the following aspects:
- State-wise registration will be required: In the old regime, a service provider could operate with a single place of registration, since services were taxed only by the Central government. For example, if an IT services provider was present across states, they could carry out tax and delivery transactions from the main location. However, now a service provider that is offering services across states must register each place of business separately in each state. This is because the new GST regime entails taxation of services at “location of service recipient”, which will differ for different states. This means service providers will need to register afresh in new states and then carry out tax transactions separately in each state. For example, an IT company like TCS that has a widespread presence across states will need to decentralise service delivery.
- Decentralised reporting will add to costs: Under GST, the “location of service recipient” is the key criterion for how a service will be taxed. Tax considerations will be related to the place the service is being delivered, and even a pan-India service provider with several “locations of service” will need to maintain state-wise records of input credit, audits, service consumption, etc. For example, earlier a service provider like TCS would enter into a single contract with the client, based on its main location, and then would discharge service tax based on the single-service tax registration model. GST will decentralise service delivery models, ensuring various TCS units adopt their own tax reporting and tax management. While this need for decentralised tax tracking and processing is an immediate cost to service providers, it presents a very real opportunity to streamline reporting and compliance measures for the future.
GST offers clear benefits to the services sector, and while some of these measures entail additional cost and effort in the short term, businesses can look forward to simpler operations with the new taxation laws.
All in all, services industries must gear up for better ways to manage business. Now is the time for them to equip themselves with the right people, processes and technologies, and emerge as service providers of the future.
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Oct 24, 2018
While dining at a restaurant, customers either settle the bill through cash or by using a credit or debit card. Similarly, online shopping also offers the advantage of choice of paying by cash or card. In both cases, apart from offering quality service and/or products, the customer experience is further enhanced when a merchant offers the convenience of choice. Keeping customer satisfaction in mind, the use of card payment devices has become a norm for modern-day businesses. After all, a business’ success largely depends on how happy its customers are. A well-run business attracts more customers and eventually ensures long-term gains. These include better profit margins, wider customer base, higher brand value, etc.
One of the key factors that makes all this possible for a business, regardless of its size, is working capital. A travel agency runs very differently from, let’s say, a flourishing B2B business. However, the need for access to quick finance is something they have in common. Given that swiping of credit or debit cards is fast becoming commonplace, businesses are waking up to the fact that they can utilize point-of-sale card machines to their advantage. In other words, they can use the cash flowing into their merchant account from card swipes to avail of merchant credit advance.
Merchant cash advance companies ensure a quicker and easy access to money. Turning to a conventional lender for working capital needs is not always possible for a small business, nor in most cases is it simple. This swings the spotlight on merchant cash advance loans. A tailor-made financial product, Capital Float’s merchant cash advance option has benefited several Small and Medium Enterprises (SMEs).
Our association with several point-of-sale card machine vendors like Mswipe, ICICI Merchant Services, Pine Labs, Bijlipay and MRL Posnet enables a wide range of merchants to obtain customized working capital solutions from us in the form of a merchant cash advance loan.
Approaching merchant cash advance companies like Capital Float makes sound sense for SMEs in search of quick access to funds. Here are 5 important reasons why SMEs should opt for merchant cash advance loans over other types.
1- Broader loan range: Capital Float’s merchant cash advance loan offers SMEs the flexibility of choosing the exact amount of capital they need. Addressing credit requirements ranging from as low as Rs. 1 lakh to as high as Rs. 3 crores, this is a customized financing option based on the monthly card settlement of a business. A merchant credit advance loan is an ideal solution for those who have consistent card inflows as well as short-term investment requirements.
2- Flexible loan tenure: Apart from offering the advantage of cashless transactions, point-of-sale machines can help speed up access to working capital. Capital Float’s merchant cash advance loan, based on card swipes comes with the benefit of flexible loan tenure. SMEs can opt for a 6-month or 12-month repayment term, making it easier to pay back the loan at their convenience.
Besides, payment to the merchant cash advance company varies directly with the merchant’s sales volumes. This means SMEs have the option of paying less during a low season. Additionally, with this innovative alternative, they need not pay monthly EMIs which are the norm in traditional small business loans; they can pay weekly or fortnightly installments too.
3-Get up to 200% of your monthly card settlement: Merchant credit advance loans work like a charm for retail businesses as well as restaurateurs. Given the high extent of card swipes in today’s digitized and connected world, one can receive financing up to 200% of monthly sales from card payment machines. Higher card swipes can mean a higher loan amount.
4- Apply anytime, anywhere: Typically, loan applications are a laborious process requiring several trips to the bank. But alternative financing options like merchant credit advance are anything but that. In fact, merchant cash advance companies offer a quick and hassle-free online application process, with forms that can be filled and uploaded anytime, from anywhere. The entire process of filling out an application form and submitting the required documents takes just 10 minutes. It is time to bid adieu to lengthy procedures and paperwork required for a conventional loan.
What’s more, at Capital Float we understand the value of quick access to credit. Meeting an unexpected business expense or leveraging a lucrative business opportunity can be a challenge for well-managed businesses. Utilizing innovative technology for speeding up loan approvals, Capital Float disburses merchant cash advance loans within 72 hours.
5. Simple pre-requisites: Merchant credit advance is something SMEs can easily apply and avail of. The prerequisites are simple and include the following qualifiers:
- Operational history of one year
- Minimum turnover of Rs 20,00,000
- Card acceptance vintage of six months
- Minimum monthly card volume of Rs 1,00,000
- Minimum of six settlements per month
Personalized and transparent
Capital Float fully comprehends the fact that loan products need to be customized according to the needs of a business. Therefore, going for a financing option like merchant cash advance loan makes sound sense. SMEs receive exactly what they are looking for in terms of working capital; and the merchant credit advance is convenient in terms of repayment.
Capital Float believes in conducting business in a transparent manner; we do not levy any kind of hidden charge whatsoever. There is no pre-closure penalty either — another advantage in the merchant cash advance loan. The borrower is only obligated to pay a processing fee of up to 2% of the loan.
Capital Float aims to remove financial barriers that stand between SMEs and growth by providing easy access to capital. Our merchant cash advance loans are a simple and secure means to bridge the credit gap that small businesses routinely face.
Oct 24, 2018