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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Advent of the Business Technologist

The tech revolution has caused several traditional roles to evolve and assume new dimensions and responsibilities in recent years. One such role is that of the Business Analyst (BA). Larger multinational companies were the original movers behind the creation of this unique role. All these organisations inevitably had one thing in common – meticulously planned and detailed organisation structures. In such an environment, BAs were tasked with continuously improving systems and processes while driving IT adoption across the board to govern the same.

The recent waves of start-ups resulted in the organic transformation of this traditionally vertical-based specialist into that of cross-functional professional with the expectation of being able to deliver on all fronts, cutting across business verticals. The prominence and necessity of such a role to drive strategic, tactical and operational excellence in the start-up environment, is now seen as more of a necessity than a luxury. These individuals, with evolved professional capabilities, are akin to the ‘Smart Creative’ that Google has postulated. They are hands on, driven by data analytics and are known to bring a fresh perspective to the table, consequently making them one of the most sought after employees in the market.

The advent of the Business Technologist has been triggered by the rise of sophisticated challenges that require a nimble response mechanism from a technological perspective. Businesses are constantly attempting to overcome new challenges as they arise. Technology, which is advancing at an exponential rate, becomes the perfect vehicle to address these challenges. Establishing a robust response mechanism to resolve them prepares the organisation to swiftly move on to the next challenge. Business technologists often become the architects and propagators of this change within organisations.

The stark contrast between the BA and the BT is highlighted in the overall responsibilities assumed by them. For instance, BAs are responsible for overseeing a process and ensuring that they optimise it to a state of best practice. BTs on the other hand are in a position to innovate and redesign the underlying process itself. This redesign can be caused by a variety of reasons, ranging from lack of IT adoption, the existence of better delivery models, to uneconomic business practices. It can even be a consequence of the process not being in line with the overall strategy of the organisation. Such is the liberty that is given to the BT.

The emergence of this professional leads us to the conclusion that success of technology does not depend merely on its adoption – it is more dependent on understanding the implications of its deployment in the most complex business environments. All this while ensuring that maximum value is being derived from these potentially capital intensive technology ‘solutions’. One may argue that this is the responsibility of the CIO or her team – someone whose role in the organisation is to work primarily on strategy or the execution of technology. However, given the dynamic nature of roles and responsibilities in the modern-day work environment, organisations must have BTs spread across business functions, as well as lines of business. The failure to do so is likely to result in sub-optimal efficiencies.

Much like the ‘rise’ of the ‘Business Analyst’, which was a direct consequence of the tech revolution, the age of the start-up has led to the advent of the Business Technologist. Sure, it’s not how you can expect anyone to introduce themselves in a corporate context. As a matter of fact, until a few years ago, the BT didn’t even exist. Today we can go ahead and safely say that such individuals must be well versed in a variety of disciplines – ranging from operations, business strategy, unit economics and talent development – to core technical areas such as IT, engineering architecture and others.

This distinctive role can also be compared to that of an in-house management consultant. The key difference between the two professionals is that the business technologists are not afraid to roll-up their sleeves and get their hands dirty. They will not stop at a prescriptive solution, but will get knee deep in the problem while attempting to solve it. The quicker the organisations embrace this evolved being, the faster these organisations can become flagbearers of the new phase of the technological revolution.

Arjun Nair

Arjun has a deep understanding of the Indian SME universe as a consequence of having dealt with this juggernaut for the last 5 years. Starting off his career at Tally, where he gained insight into this industry in a variety of areas including IT adoption, overall size of universe, etc. He now spends his days at Capital Float leveraging this information to increase customer acquisition. True to the article, he also spends his time ensuring cross functional synergy across functions in the organisation. From enabling the SME universe with IT at Tally he now wishes to empower them through financial inclusion.

Arjun is a Business Technologist at Capital Float

Oct 24, 2018

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Capital Float partners with Payworld to boost business of kirana stores in India

Capital Float, the largest digital lender in India, has partnered with Payworld to provide kirana store owners with convenient financing options, enabling them to expand business operations. Small retailers are often underserved by traditional financial institutions because of their limited credit history. These retailers can now avail hassle-free working capital from Capital Float, which will help them manage inventory and cash flows with added scalability.

There are more than 12 million small retailers in India. Many of these businessmen put decision-making on hold because of traditional credit barriers. Through this partnership, Capital Float will provide small retailers with collateral-free loans, which will help to exponentially increase their capacity to do business on the Payworld platform. Once the loan is approved, the retailer can request for funds using the Capital Float mobile app and the funds are disbursed within 10 minutes.

“Due to the lack of established lending norms and consequent delay in financing activity, existing and new players in the retail space have lesser access to credit, which affects their growth and expansion plans”, said Gaurav Hinduja, Co-Founder, Capital Float. “With Payworld, we have simplified the lending process so that neighbourhood kirana stores are able to fulfil their financial needs and better service their customers,” he added.

With India becoming digital, Payworld helps customers in remote locations with limited access to electronic payment methods, perform daily transactions like booking bus tickets or paying mobile bills via Payworld’s network of retail points, which includes kirana stores. A proprietary algorithm developed by Capital Float uses non-traditional, surrogate data sources, including each retailer’s performance on the Payworld platform, to build a personalized credit profile and provide customized finance options to the retailer. In the long term, this will also develop an official credit profile for these retailers, thereby increasing their chances of availing credit products from traditional financiers.

“In keeping with our business philosophy of ‘Making Life Simple’, we have partnered with Capital Float to provide the retailers in our network the support they require to boost their business. This is critical in building retailer loyalty to our platform, giving them the confidence to increase the number of transactions, positively impacting revenues for them and us” said Praveen Dhabhai, COO , Payworld.

Click here to read the full press release on The Economic Times

Oct 24, 2018

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Offers and Benefits at GIFF

We understand your working capital needs as an SME, and hence bring you the best of credit products in a comprehensive finance bonanza that extends from July 1 to September 30. Capital Float’s Great Indian Finance Festival or ‘GIFF’ offers you a one-stop shop for your working capital needs where you can choose loans with easy terms in an informed and beneficial way.

Why GIFF?

Taking a loan can be a stressful and arduous process for small business owners—from lengthy applications to intense verification and delayed disbursals. We at Capital Float know that timing makes all the difference. We wish to empower you to do what you do best—focus on your business. So let us take care of all the funding issues. You can focus on fuelling your ambitious plans while we power your growth engine by offering you the best of credit lines.

Here’s What You Gain

Not only does the Great Indian Finance Festival mean ease and speed of credit, it translates to something much more. It makes life easier for the growing pool of SMEs we engage with.

Gold: Avail a loan in the Flash Sale, and walk away with gold worth up to ₹10,000, depending on the loan amount borrowed.

Plummeting interest rate: It’s time to rejoice and tap into a great opportunity. Interest rates will be as low as 16%. A great boost for your business at a super-affordable rate is waiting round the corner!

Speedy application process: Now, there’s no need to wait in long queues at the bank. If you have an Internet connection, you can avail the best loan for your business on your smartphone, tablet, or from the comfort of your desktop. It takes less than 10 minutes to apply, and our cutting-edge processes help us disburse your loan in less than 3 days.

Let’s Celebrate Credit

We have already devised credit products that are attuned to the needs of small and medium enterprises. Here is what we have curated for the three-month online finance bonanza:

Merchant Cash Advance: Whether you are a restaurateur or a retail owner, there’s a high chance a majority of your revenue comes from clients’ card payments. You may then need to have consistent card settlements and short-term investments to meet your working capital needs. Merchant Cash Advance is your go-to loan, allowing you to access quick finance of up to Rs 1 crore, depending on your monthly card settlements. What’s more, you can avail of a loan that’s up to 200% of your monthly sales from card payment machines. In addition, the loan tenure ranges from 6 months to a year, on flexible payment terms. Fill out an application form in 10 minutes, get it verified within hours and get funds in as little as 3 days! All this happens thanks to our trusted partnerships with point-of-sale card machine vendors such as Pine Labs, Mswipe, ICICI Merchant Services, MRL Posnet and Bijlipay.

Unsecured Business / Term Loans: Business is about passion, but you may not always have received the backing so far. Our Term Loans and Unsecured Business Loans are tailor-made for you. We understand the worthiness of a positive cash flow and, based on this, are willing to lend you the short-term funds you need to grow and diversify. Our Term Finance helps you meet your working capital needs from Rs 1 lakh up to Rs 50 lakh over a tenure of 6 months to 3 years. Moreover, you don’t need to pledge collateral to get the loan.

Online Seller Finance: We understand the competitive world of e-commerce— the shrinking lead times, fluctuating levels of inventory, constantly changing pricing decisions and sky-high customer expectations. Our Online Seller Finance loans are designed for eCommerce merchants operating on online marketplaces. The funds received can be used to expand to other product segments, increase inventory or pay suppliers. We have partnered with leading online portals like Amazon, PayTM, Myntra, Shopclues eBay, etc. to service merchants like you operating on these marketplaces. We customise this credit line to your unique business needs, by analysing your monthly sales, projected revenue and other factors.We provide an unsecured loan up to Rs 1 crore or up to twice your monthly sales which mean that you no longer have to worry about expensive collateral to build your business online. No pre-closure charges and flexible repayment terms like fortnightly repayment will take your mind off financial burdens and let you focus on business growth. With the right documents and data, our Online Seller Finance can be disbursed within 3 working days.

Each of these credit offerings will run under Flash Sales, so watch out for announcements on the site. Each Flash Sale will run for 3 days and you can win exciting prizes apart from big discounts. So gear up to catch the right moment, and the right loan offer.

Clearly, GIFF is a goldmine of opportunities designed to serve SMEs across India. We will go along with you every step of the way, to help you realise your business ambitions! Visit www.capitalfloat.com/giff to know more.

Oct 24, 2018