A Complete Guide to Private School Loans for School Owners

As the number of schools continues to grow in India, the existing institutions must keep improving their standards to ensure that they have the facilities sought by students and their parents.

The methodologies of teaching today are significantly different from what they used to be two decades ago. In addition to well-ventilated classrooms, laboratories, library, spacious playgrounds and sports gear, the infrastructure of schools today also needs a host of audio-visual equipment and computer devices to provide quality education. At times, it is necessary to apply for school loans to finance the purchase of such school infrastructure components.

How to get loan for school

Loans for private schools can come from several sources including banks, non-banking finance companies (NBFCs) and private money lenders. From the construction of a new school building and renovation of old ones to the purchase of furniture, lab equipment and other devices, school loans are issued for a variety of purposes.

The flexible lending policies of digitally enabled NBFCs, also known as FinTech companies, have made it easier for schools to get quick loans at easy terms. Furthermore, these organisations do not need any collateral from their borrowers: this makes a high number of institutions eligible to apply for school loans.

Eligibility Factors

In India, a FinTech company’s loan for educational institutions is usually available to private schools that:

  • Have regular and fully functional classes from Lower Kindergarten to Class VIII/X/XII
  • Collect a total fee of more than Rs 75 lakh per annum
  • Have their school building on a self-owned property
  • Have promoters or trust to run the school

Schools that fulfil the criteria can borrow any sum up to Rs 50 lakhs for a term ranging between one and three years.

How to apply for FinTech school loans

In addition to being collateral-free, the easy application process of FinTech loans draws a majority of borrowers to this source of funds. You may need a loan for construction of school building, to buy audio-visual devices used in teaching or to bring other improvements to your institution. You can digitally request for the funding at any time from anywhere.

The application takes less than 15 minutes to be filled and needs to be substantiated by only soft copies of documents that verify your eligibility for the loan. These typically comprise:

  • Financial statements for the last two years
  • Bank statement for the last 12 months
  • KYC of at least two promoters
  • The fee structure for students
  • Remuneration structure for staff

Once the application is reviewed by the lending organisation and is approved for the loan, the requested amount is disbursed in less than a week.

Since you will fill the application and provide your details digitally, you have to ensure that the lender’s website domain begins with https: so that the information gets encrypted. Also, check the interest rate and loan processing fee to know your EMIs for repayments.

As a leading FinTech company in India, Capital Float issues loans for private schools in India at the simplest terms and disburses funds in only 2-3 business days for approved applications. We have no additional fee other than the interest rate and a loan processing charge of only up to 2%. To know more about our school loans, feel free to connect with us on 1860 419 0999.

Apply for Unsecured school loan

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Implications of GST on SMEs

One of the biggest tax revolutions of India is underway as businesses and tax payers are gearing up for the change. These enterprises and individuals are assessing how the GST rollout will make a difference to them. One such segment is the Small and Medium Enterprises (SME) segment, which contributes significantly to India’s GDP and exports. The positive effects from GST are expected to drive decentralization of opportunities and provide an impetus to India’s GDP. However there is some concern that some of its policy implications could slow down business, and that is what small and medium enterprises must prepare for. Gaining know-how on GST rules and implications is the first step towards becoming GST-compliant and becoming tax-savvy. This blog will help you understand which SMEs are eligible for GST and the impact on the sector as a whole.

How GST will impact business transactions

GST will typically impact any business at two ends of the spectrum where transactions are involved i.e. for input transactions and for output transactions.

  • Input transactions: An input transaction is a transaction carried out for the supply of input goods / services like raw material procurement, imports etc. Input transactions will be directly affected due to the changes in taxation levels of raw materials/industrial inputs, affecting the product or service pricing.
  • Output transactions: An output transaction is one that is done for outbound supplies or service delivery. For example, sales is an output transaction. GST will directly impact the sales by altering the taxation of the product or service being sold. Depending on the new tax slab of the goods or service, the profitability of the enterprise will be directly impacted.
    Another significant impact area is due to the concept of “place of supply” and “time of supply”, calling for more stringent supplier compliances.

Which SMEs are eligible for GST? 

SMEs are a major driver in the Indian economy, contributing to almost 7% of the manufacturing GDP and 31% of the services GDP. With a consistent growth rate of about 10%, they employ about 120 million people and contribute to around 46% of the overall exports from India.

Under the GST regime, this significant sector too is set to change. First and foremost, all businesses, including SMEs will need to register for GST under the rules as per the following threshold limits related to aggregate turnover:

Region Liability to Register Liability for Payment of Tax
North East India Rs. 9 lakh Rs. 10 lakh
Rest of India Rs. 19 lakh Rs. 20 lakh

Why should SMEs enrol for GST? 

An SME registered under GST will be recognized as a legal provider of goods and/or services. Tax accounting will be streamlined. Such an SME will be able to maintain proper accounting of taxes paid on input goods or services, and be able to utilise the inputs credit facility to enable better cash flows. GST will provide an opportunity for SMEs to digitize their transaction management, making it efficient for the future. If such an SME scales up, it will be prepared in advance to manage large-scale transactions through software. GST enrolment thus provides a window of opportunity to modernise the business and set up standards for doing business easily in the future.

Moreover, digital transactions tend to leave a digital footprint. These footprints can be used to assess the sector with greater accuracy, as Fintech lenders can create customized financial solutions for these SMEs, which are currently under-served from a credit perspective.

Impact of GST on SMEs

Overall, the SME sector seems to be skittish about the impact of GST. Here is a look at some of the pros that GST brings to SMEs.

  • Ease of starting a business: The old tax regime requires new entrepreneurs to obtain VAT registration for every state separately, with each state having its own rules. Though GST too requires businesses to register in each state, the rules for GST are more uniform and outlined clearly on the portal. This will make it easier to set up an SME.
  • Ability to compete with multinationals and multi-state enterprises: GST is a destination-based taxation system and not source-based. Locally manufactured goods by SMEs will pay the same amount of tax as imported goods from multinationals. Moreover, corporates generally ‘stock transfer’ transfer goods to escape the taxes on inter-state transfers. SMEs are not able to ‘stock transfer’ goods due to lack of infrastructure; they physically transfer goods and pay inter-state taxes, leading to higher expenses. Under GST, the stock transfers would be taxed. This will help put SMEs at par with large multinational corporations, allowing them to compete on an equal tax footage.
  • Transparent transactions: SMEs often do not have the resources (processes and people) to dedicate to tax transaction management. GST will enable an online and transparent view of tax obligations and on-goings, minimizing the need to liaison with tax authorities offline. Though it will take some initial investment now, SMEs that streamline their transactions now will be setting up future-ready systems and processes.
  • Reduced tax burdens due to rise in threshold: Under the old regime, business owners with an annual turnover of Rs 5 lakh (Rs 10 lakh in the North East), mandatorily need to register for VAT and make VAT payments. Under GST businesses above Rs 20 lakh turnover (Rs 10 lakh for North East) qualify for GST registration, which brings huge relief to SMEs. Thus, businesses that fall in the Rs 5 lakh – Rs 10 lakh revenue bucket need not register and will experience better cash flows because they are exempt from GST.
  • Better Cash flow due to input credit facility: Cash flows may increase because of facility of input tax credit, wherein businesses will be able to avail credit on input expenses such as supplies. For example, for a business that procures steel as the raw material to manufacture utensils, the businessman will need to pay tax on the raw materials procured i.e. iron ore. He can adjust the tax paid on inputs from the taxes collected on outputs. This means that only the actual “value addition will be taxed.
  • Better logistics: GST will help eliminate time-consuming border tax protocols, allowing for free flow of goods across borders. This will result in savings in logistical costs. CRISIL estimates that the logistical cost for companies manufacturing bulk goods will be reduced by around 20%.

Key Concerns around GST

  • Investment to go tech-savvy: SMEs are typically not used to managing complex tax compliances, but GST will need SMEs to go digital. SMEs may need to hire or consult with GST experts to bring about a technology makeover resulting in additional expenses.
  • Reduced tax exemptions: SMEs are eligible to avail a central excise threshold exemption of Rs 1.5 crore gross turnover; under the GST regime this exemption will reduce to Rs 20 lakh. As a result, SMEs with turnovers between Rs 20 lakh and Rs 1.5 crore will not be eligible for this tax exemption. This is an additional cost that will pinch SMEs that were previously used to being tax exempt.
  • Higher tax rates may impact profitability: Despite assurances by the Finance Minister that overall tax slabs will not increase, the GST slabs indicate otherwise. The services tax rate has distinctly increased from 15% to 18%. Higher tax outflows means lesser profitability.
  • Strict tax-compliance norms means more costs: GST will bring in an era of stringent compliance. For example, purchase invoices raised will have to be reconciled with the supplier of the goods. These invoices have to be uploaded by the entity by the 10th of every month and will need to be reconciled by the 15th of every month. SMEs are not used to carrying out such detailed and timely tax transactions and will need to hire personnel to help with tax management and compliance.
  • Supplier-side compliance will affect the GST compliance rating: The ability of an SME to claim refunds is a direct result of its GST compliance rating. Going ahead, SMEs will be accountable for their suppliers’ non-compliance and they may take a hit on their Compliance Rating due to non-compliance at any leg of the operating cycle, right from procurement to service. Maintaining compliance records, periodic audits will need to be instated to ensure compliance of all stakeholders. This responsibility of supplier-side compliance is an added cost to the company.
  • Time lag in input credit process: Input credit will only be available after a supplier declares the particulars of the supply and after these details are validated by the buyer electronically. Thus, a supplier is heavily dependent on the buyer’s response, leading to a probable time lag in availing input credit. Moreover, the timeline for claiming input tax credit is very limited— before the due date of filing returns for September of the next financial year, or, the due date of filing annual returns, whichever is later.

GST is all set to usher in an era of simplified taxation. SMEs must decide on the right investments to optimise the benefits of the change. This means investing time and resources in understanding the change, getting the right people and processes to change the way they do business to ensure GST-adherence. Such SMEs will emerge future-ready and poised to scale their business like never before.Get more information about GST on our GST blog.

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Oct 24, 2018

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5 reasons to pay EMIs/Credit Card payments on time

Timely payment of EMIs or credit card bills is an essential aspect of taking charge of your financial life. Very often, people miss their bill payments because of their busy schedules. Making on-time bill payments a priority will lead to many benefits and will keep you out of debt traps.

Here are five reasons to pay your EMIs or credit card payments on time:

  • Good credit standing: Making timely payments of EMIs or credit card bills will ensure that your credit history remains positive. A good credit score makes you creditworthy. Having a high credit score will enable you to avail quick, formal finance to address your needs in the future.
  • Avail loans easily: If you have a high credit score, banks or financial institutions won’t hesitate to sanction your loans. You can even get higher loan amounts with low-interest rates.
  • Save on fines: You may avoid the penalty or late payment fee that banks charge by paying the EMIs or credit card bills on time. This helps avoid increasing your financial burden.
  • Save money: When you pay your EMIs or credit card bills on time, you save more as the interest on the outstanding amount does not increase. Lenders may charge high interest on delayed repayments.
  • Keep the monthly payments low: When you miss your bill payment for a month, you will need to pay it the following month. So, the amount to be paid in the next month will increase. Your next payment will include two installments and also the penalty charge, thereby compounding the owable amount. 

Late payments can affect the financial position of people adversely. Make it a habit to pay all your dues on time. It will not only reduce your stress level but also help you avail of all the benefits mentioned above.

Oct 24, 2018

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Top 10 Reasons Why Private Schools Take Loans

To provide quality education, private schools in India must have cutting-edge infrastructure and well-planned facilities. This is even more important now because the generation currently in schools is growing in an environment of mobile computing devices and e-commerce. Since private institutions are entirely dependent on their own earnings to improve their campus, they may need school loans to finance such expenses.

Let us look at the top reasons that drive schools towards taking loans from banks and NBFCs:

1. To construct a new school building

school_refurnish

Loan for construction of school building is commonly sought by institutions that are successfully providing education services but need more classrooms to accommodate the increasing number of students. Adding more sections for each grade is also a good idea when schools are focused on keeping a low student:teacher ratio.

2. To build a playground/sports court

school_sports_playground

School loans may also be required to add a playground, basketball courts, tennis courts or rooms for indoor sports. Games are an essential part of school education, and if a small unsecured loan from an institutional lender can help to build a beautiful playing field, the investment is worthwhile.

3. To develop a laboratory

school_laboratory

Schools need to have well-equipped labs for practical experiments concerning physics, chemistry, biology and to give students hands-on experience with computer studies. Some private schools are also required to have Home Science labs as per the curriculum for their students. A quick loan for school laboratory can be procured at easy terms from a FinTech lending company. Such lenders usually provide up to Rs 50 lakhs on loan for building school laboratory.

4. To buy furniture for classrooms, staffroom

school_furniture

A simple reason to apply for a loan could be the purchase of new or additional furniture for students and staff. The cost of ergonomic desks and chairs may not be within the budget of the school, and financial support from a FinTech company can come in handy.

5. To purchase commercial vehicles

commercial_vehicle_school_bus

Schools that provide transportation services to their students and staff may need to buy new buses or vans. If adequate finance is not available for such purchases, FinTech lenders can offer simple digital modes to provide unsecured loans with flexible repayment options.

6. To build or improve a library

school_library

Well-stocked libraries are essential components of any school’s infrastructure. A school that has been running successfully for some time, but does not have a library, can borrow funds from school loan companies to build a quality library on its campus. Unsecured school loans can also be taken to buy stocks of new books that are too expensive to purchase in the available library budget.

7. To start a new facility on premises – stationery/canteen/uniform shop

school_mess_canteens

Private schools try to offer all the essential facilities for the convenience of students. If there is a stationery unit on the campus, students can purchase prescribed textbooks and other essential items without having to visit markets. A shop for summer and winter uniforms makes it easy to buy the exact uniform as required by the school. While canteens are not “must-haves”, they are good to provide hygienic menu options to the students and staff. School loans may be taken to fund such facilities.

8. For repairs and renovation

school_construction

A school that already has structures or facilities for education and sports may also need a loan to repair, renovate and improve them. It can digitally apply for such funds on a FinTech company’s website.

9. To purchase new teaching devices, audio-visual equipment

school_smart_class

School loans fund the purchase of interactive teaching devices that are becoming increasingly important in the digital age. Educational institutions can borrow to install whiteboards, overhead projectors and other audio-visual teaching aids to make learning more interesting for their students.

10. To add/improve day-boarding facilities

Some private schools offer day-boarding amenities to their students. As a part of this facility, they need to provide healthy meals and areas for rest and recreation. To build and improve such environment, they may need loans that are offered most conveniently from FinTech companies.

As a leading digital NBFC offering loans to educational institutions, Capital Float funds all such requirements of schools in India. To know more about our financing products, feel free to call us on 1860 419 0999.

Apply for Unsecured school loan

Oct 24, 2018