What is a Business Loan? How to Apply for It?

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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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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Changes in the GST Taxation System – with effect from 15 November 2017

Composition Scheme Changes

  • GST rate at 1% for manufacturers and traders
  • Composition scheme limit to be extended to ₹1.5 crore
  • Composition tax of 1% on turnover of taxable goods
  • Interstate sales are not permissible for composition dealers. Input tax benefit not allowed.

GST Filing Extensions

GSTR form Previous Due Date Revised Due Date
GSTR-5 (for Non-Residents) Before 20th August 2017 or & days from date of registration 15th December 2017
GSTR-4 (for Composition Dealers) 18th October 2017 24th December 2017
GSTR-6 (for Input Service Distributors) 13th August 2017 31st December 2017
ITC-04 (for the quarter of July-September) 25th October 2017 31st December 2017
TRAN-1 30th September 2017 31st December 2017

Taxpayer Relief Measures

  • Reduced Late Fee: For delay in the filing of NIL returns, late fee will be reduced from ₹200 per day to ₹20 per day.
  • Credit of Late Fee: For filing of GSTR-3B for the months of July, August and September, late fee has been waived. Any late fee paid will be credited back in Electronic Cash Ledger under ‘Tax’ and can be utilized for GST payments.
  • Manual filing for ‘Advance Ruling’ to be introduced
  • Export of services to Nepal and Bhutan are now exempt from GST. Input tax credit, if paid, can be claimed for refund.
  • Taxpayers with turnover less than ₹1 crore should file invoices every month, while those with turnover greater than ₹1 crore should file invoices every quarter.

Revised GST Rates for 178 Goods and Services

Goods/Services Present GST Rates Revised GST Rates
Guar meal, Khandsari sugar, Dried or frozen vegetables, Uranium ore concentrate, Hop cones, Unworked coconut shells 5% Nil
Desiccated coconut, Idli Dosa Batter, Coir products, Fly ash bricks, Worn clothes or rags, Fishing hooks, Leather or chamois after tanning or crusting, Nets of textile material, Restaurants (non-Ac) 12% 5%
Potato flour, Chutney powder, Sulphur recovered as by-product in refining of crude oil, Specified parts of aircraft, Scientific and technical apparatus, Computer software and accessories, Restaurants (AC) 18% 5%
Condensed milk, Diabetic foods, Refined sugar, Medicinal grade oxygen, Printing, writing and drawing inks, Pasta, Curry paste, Mayonnaise and salad dressings, Mixed seasoning, Parts of agricultural & sewing machinery, Bamboo and cane furniture, Frames and mountings for spectacles, Hand bags and shopping bags of cotton and jute 18% 12%
Wet grinders, Tanks and other armoured fighting vehicles 28% 12%
Chewing gum, Chocolates, Preparation of facial make-up, Preparations for oral hygiene, Toothpaste, Shaving and after-shave items, Shampoo, Deodorants, Detergents, Granite and marble, Handmade furniture, Electric switches, Watches, Sanitary ware, Cases, Cutlery, Refrigerators, Flavoured drinks, Water heaters, Fire extinguishers, Printers, Automatic goods vending machine, Transmission shafts and cranks, Fork-lift trucks, Self-propelled bulldozers, Batteries, Static converters, Vacuum cleaners, Cameras and projectors, Microscopes, Musical instruments 28% 18%

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Oct 24, 2018

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What is UBL and how we underwrite it

The SME sector in India is large and burgeoning. It contributes 45% of the industrial output and 40% of exports, and employs over 40 million people. With rapid economic growth and the impetus being given by the Government, this sector is expected to grow at a phenomenal pace, from accounting for 15% of India’s GDP in 2015 to 22% in 2018.

SMEs need funding

Despite its enviable growth, the smaller merchants and retailers face chronic cash shortage. Traditional banking offers more challenges than solutions to such enterprises. They are faced with long approval periods, demands of collateral, unsurmountable eligibility criteria and loan terms that are unsuitable to address short-term cash flow issues.

Unsecured Loans Provide the Relief

This is where unsecured loans come to their rescue. These are typically shorter-term loans that do not require collateral or guarantors. Some financial solutions are specifically designed to aid SMEs to address their working capital needs or expand their existing business. SMEs often work with limited resources and may find it challenging to pledge collateral to secure a loan. Unsecured business loans prove to be highly beneficial in this regard.

The Greatest Challenge to Overcome

Since unsecured loans by definition have no collateral to back them, a stringent underwriting process needs to be in place to ascertains the applicant’s intent and ability to repay the loan. The loan underwriting process must include the collation and verification of all the data provided by the applicant. This information is analyzed to determine the financial health of the enterprise and the creditworthiness of the individuals most closely associated with the business.

Relying on Cutting-Edge Technology

At Capital Float, we deploy cutting-edge technology to ensure that the process of loan approval is smooth, seamless and swift. This data driven process begins with the loan seeker filing an online application and uploading/giving access to all the relevant documents, including the company’s ITR, sales figures, balance sheet and cash flow statements. Our systems pull the data automatically from various external sources and populate the relevant fields. Capital Float lays specific importance to digital data available in the eco system e.g.; telly ledgers and purchase ledgers.

Apart from the documents provided, weightage is given to company ratings provided by rating agencies like CRISIL and ICRA. The bureau data is used extensively which goes beyond CIBIL scores and looks at hundreds of variables which might predict customer behavior.

The system collates all this information and draws up algorithm-based scores for each business. This initial screening process has no human intervention, since the technology is intelligent enough to identify a risky borrower and reject an application that does not meet the minimum criteria. All this is done in a matter of five minutes; whereas traditional banking could take anywhere between one to three months to decision a loan.

Once an application clears the first screening, experts from Capital Float visits the company’s premises, which could be the registered office or the factory. The experts spend time to understand the business model, the processes, the production capacity and the utilization of existing resources to gain a deeper insight into the health of the enterprise.

These inputs are also entered into the system, which uses powerful algorithms to analyze all the data being collated. These algorithms aid credit managers to take a more informed decision regarding loan approvals.

Thus, with the help of ground-breaking technology, Capital Float is able to approve loans in less than a week, while also ensuring NPAs remain exceptionally low.

Oct 24, 2018