Cashflow is the lifeblood of any organisation, including schools. Unlike most small and medium enterprises that have unstable revenue because of variations in customer purchases and seasonal cycles, schools are usually assured of a running income from the fees paid by the students each quarter. However, cashflow management is as serious a task for educational institutions as it is for any other business.
With the fee they receive, schools have to pay their teaching and administrative staff, maintain the campus, periodically purchase lab equipment, sports supplies, furniture and other items, and keep some reserves for unforeseen expenses. When money falls short of requirements, they may have to apply for loans from a school finance company. In addition to banks, FinTech organisations have stepped forward as significant providers of school finance in India.
Whether a school manages its operations with its earnings or takes the support of school finance, it is essential to handle the fund prudently. The following tips for cashflow management in schools can help the owners avoid severe financial constraints:
Anticipate future requirements: Will some students be leaving the school to change their board (CBSE, State Board, ISC, IGCSE) from the next academic year? Will you be hiring any new staff members? Does the school need to replace any furniture or teaching equipment? It is good to have a basic idea of such needs as they have an impact on your earnings and expenses. If you feel that the outflow of cash could be more than the inflow and reserve funds, it may be necessary to apply for school finance.
Make arrangements with vendors: If you have developed long-term relationships with the vendors who regularly supply lab materials, sports gear, canteen groceries and other provisions to your school, you can make occasional arrangements on payment terms. As an example, if your regular pay cycle from the receipt of invoice is 30 days, it can be extended to 45 days in a period when you are spending funds on additional works in the school.
Work to maximise cash inflows: With constant improvements in your education services, you can attract new students, which will have a positive impact on your earnings. Schools that have classes till Standard VIII but have a reasonably high strength of students can work with an education board to upgrade to Standard X or XII. To facilitate the construction of a new building and for additional campus amenities, you can apply for school finance by sending a quick digital application to a FinTech company. The revenue generated from fees paid by students in new upper classes will help you to pay off the borrowed amount and interest in small EMIs.
Stay connected to lenders: If despite your best efforts on cashflow management, money falls short of requirements, remember that funding for schools in India is available on easy terms from a FinTech school finance company. You can get a collateral-free loan, and you need to submit only the soft copies of eligibility proving documents when you choose a FinTech company as your lender.
Capital Float is a friendly FinTech organisation providing school finance to recognised educational institutions that have functional classes till Grade VIII or above and collect a yearly fee of minimum Rs 75 lakh.
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To sustain their business growth, small and medium enterprises (SMEs) sometimes need additional working capital, and the most direct way of getting it is to apply for a loan.
With business loans coming from banks, non-banking finance companies (NBFCs) and private money lenders, SMEs have multiple sources to get funding for their operations and expansion. However, these credit options have their pros and cons and should be understood to choose the most helpful alternative.
Secured vs Unsecured Business Loan
Most companies are familiar with the idea of a secured business loan that requires them to offer the lender some collateral as a security against the funding provided. The credit here is issued when the borrower hypothecates a financial asset to the lender. The hypothecation ends only when the entire principal, together with interest and any other associated charges, is fully paid off.
Banks and most other conventional sources of finance are more willing to offer secured loans because from the lender’s point of view, these carry less risk than unsecured funding.
The main advantage for a borrower taking a secured business loan is that the interest on such credit is lower since a guarantee of their asset backs the loan.
Conversely, the challenge is that lenders, particularly banks, accept only selective assets as collateral. They need to ascertain that such an asset can be liquidated in minimum time in case the lender defaults on payment. Due to this condition, many SMEs find it difficult to get secured loans. They may not have assets that are considered as relevant or sufficiently valuable by the lender.
An unsecured business loan, on the other hand, is granted without any collateral. A non-banking finance company with a digital lending model offers such loans based on the creditworthiness of borrowers. If a business has a successful operational history of at least one year, and there are no blots on its previous credit history, it is eligible to get its unsecured business loan from a digitally operating NBFC, also known as a FinTech company.
For an enterprise that has no collateral for business loans, it is natural to opt for an unsecured loan even though the interest charged on this is slightly higher than on secured loans. However, some FinTech companies have created additional benefits with their policies that make unsecured business loan better than secured loans on multiple fronts.
While looking at secured vs unsecured business loan, these are some of the advantages that make the latter more valuable for start-ups and SMEs:
- An unsecured business loan is available for short terms – borrowers can take a working capital loan for a tenure of less than one year and thus avoid the burden of debt on long term.
- A FinTech lending company usually has a fully digital application process for its unsecured loans – it takes less than 10 minutes to complete the application and the documents to verify the information therein can also be uploaded online.
- The time taken to receive funds from a FinTech in the business bank account is less than a week – the application is usually reviewed on the same day when it is submitted, and, if approved, the sum is disbursed in the next 2-3 business days.
- A loan processing fee of up to 2% and the interest rate are usually the only charges on a FinTech company’s unsecured business loan – the borrowers do not have to pay any documentation fee, loan insurance premium, legal fee and other hidden charges.
- The repayment options are more flexible for unsecured loans issued by FinTechs – the borrowers can pay off the loan sooner than the predetermined schedule, and maybe charged a nominal pre-closure charge for making the payment.
For an SME that does not have financial assets to hypothecate and needs faster access to cash, will find unsecured business loan better than secured funding.
Here is a summarised view of the features for Secured Vs Unsecured Business Loan:
|Secured Business loans from Institutional lenders||Unsecured business loans from FinTech companies|
|Collateral required||Backed by a financial asset for collateral||No collateral / Security|
|Advertised interest rate (annual)||Between 12% and 24%||Between 18% and 24%|
|Loan processing fee||>= 2%||<= 2%|
|Extra charges||May have extra charges for documentation, loan insurance and other statutory requirements||No extra or hidden charges|
|Time to get funds into account||1 to 6 weeks||72 hours|
|Loan application process||Digital and paper-based, document-intensive loan application||Fully digitalised loan application and document submission|
|Repayment of loan||Only through EMIs||Flexible repayment options|
Capital Float is a leading FinTech company that asks for no collateral for business loans. We have customised our loans for a variety of business purposes and working capital needs. Our short-term unsecured business loans are issued purely on the creditworthiness of the borrowers and the potential of an organisation to pay back in time. We evaluate every loan application within minutes of its submission to provide the decision on the same day.
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If you have an attractive business opportunity to capitalise upon, do not put off your plans. Talk to a representative in our customer service team at 1860 419 0999 and avail yourself of the benefits of a loan without collateral.
Oct 24, 2018
“Send me your inputs so that we can see a Budget which is a Budget like never before, in a way. 100 years of India wouldn’t have seen a Budget being made post-pandemic like this. And that is not going to be possible unless I get your inputs and wish list, clear observation of what has put you through the challenge… Without that, it is impossible for me to draft something which is going to be that Budget like never before” – Hon’ble Finance Minister of India.
In the spirit of the aforementioned words of the Hon’ble Finance Minister, this article attempts to deliberate on certain aspects of the tax law, and how certain changes may help the respective classes of taxpayers and businesses concerned.
1. Liberalization of the scheme for voluntary declaration of unaccounted income
At present, the effective tax rate for declaring unaccounted income voluntarily in your income tax return is 78%. The very thought of losing 78% of the fortune deters such declarations. Can this regime be replaced with an effective tax rate of about 35% on declared unaccounted income coupled with a compulsory deposit of 40% of the declared amount in 15-year bonds? In such a case, the declarant gets to keep 65% of their declared amount though they get 40% back in their hands after 15 years. The government can allow banks to issue these 15-year bonds and use the money for credit expansion at low rates of interest to boost the economy.
2. Cashback to the final consumer a portion of GST paid if the purchase is through cashless means
An incentive like this from the government for a limited duration will encourage people to increase their purchases, thereby boosting the consumption demand and subsequently, the economy. Cashback to the final consumer will be more effective than cutting the GST rates as oftentimes rate cuts are not passed on by businesses. The Government may consider adding an additional condition that only “Made In India” products be eligible for cashbacks.
3. Discussion points arising out of Covid-19
Many individuals have got stuck in India due to travel restrictions, necessitating stay with family in India while working for foreign employers. The government released a clarification in May 2020 excluding the period between 22 March 2020 and 31 March 2020, while determining the residential status for FY 2019-20. Similar clarification is expected for FY 2020-21 as well since a change in residential status may result in increased tax liability for some individuals who have been forced to stay in India.
Furthermore, the Government may also consider providing additional tax deductions for expenses incurred on Covid-19 tests and treatment in private hospitals, which is a need of the hour.
4. Measures for easing the cash flow burden
Relaxation of advance tax norms with respect to Dividend income
India has moved to the traditional system of taxation of dividend, whereby the shareholder pays tax on the dividend income as compared to the company paying tax on such dividend declared, which was previously the case. Thus, it may be beneficial for the advance tax provisions to be amended suitably to provide relaxation from levy of interest if the shortfall in payment of advance tax is attributable to under-estimation of the dividend income.
Enhance the scope to apply for lower tax collection certificate
The scope of Tax Collected at Source (TCS) has been widened to cover the sale of motor vehicles, remittance of foreign currency under LRS or sale of an overseas tour package and sale of goods. This has resulted in persons covered by the said TCS provisions paying something more (in the form of TCS) at the time of purchasing goods or vehicles or making foreign remittances, as the case may be. A budget proposal enabling such persons (if their estimated tax liability justifies collection of tax at a lower rate) to apply for a lower tax collection certificate would go a long way in easing the crunch in cash flow resulting from an increase in cash outflow on account of TCS at the time of purchase.
With the promise of a Budget like never before, the nation waits in anticipation for the clock to strike 11 on the morning of 1st February 2021 – the date and time when the Budget speech will be delivered!
The author Rishi Dabrai can be reached at firstname.lastname@example.org or at +919945236982
Partner, NDJ & Associates
“DISCLAIMER: The views expressed are solely based on the opinion of the author and Capital Float (CapFloat Financial Services Pvt Ltd) does not necessarily endorse or subscribe to it. Capital Float (CapFloat Financial Services Pvt Ltd) shall not be liable for any loss/damage caused to any person/organization directly or indirectly. Capital Float does not guarantee the contents of the views expressed and the same are not binding on Capital Float.”
Oct 24, 2018
Pay Later is a unique loan product that was conceptualized and created by Capital Float, keeping in mind specific needs of Indian SMEs. This product is exclusively available at Capital Float. With Pay Later, a borrower is given a predefined credit limit, post which the borrower can make multiple draw-downs from the approved limit. The limit is reinstated upon repayment by the borrower. Interest is charged only on the amount utilized and not on the entire limit. These amounts can be used to make payments to suppliers. Click here to read more about this innovative product.
Pay Later: Features
1) Flexible draw-downs
You’re never obligated to utilize the entire credit limit in one go. In fact, you can always utilize a portion of the total amount sanctioned at any given point in time. To help you monitor your transactions, we recommend that you use our mobile app and manage your repayments accordingly. The mobile app keeps you updated about the draw-downs created and the limit currently available to you. More importantly, this loan amount is not consumed at once, but is a repetitive credit facility which can be used multiple times. The cycle of draw-downs, replenish and reset continues as often as you want it to.
For instance, if you have been assigned 1 lakh rupees with Pay Later, you can make up to 4 draw-downs of 25,000 rupees each and use these funds to make payments as and when necessary. By repaying the amount used, you immediately reset the credit balance, enabling the usage of funds once again. This leads to a rolling balance of funds that can be used and replenished as per requirement, giving the businessman the agility to do business unlike ever before.
2) Interest applicable only upon draw-down
Traditional loans levy a fixed interest on the entire amount sanctioned. With Pay Later, you’re required to pay interest only for the amount utilized. This means that the pre-defined interest rate is applicable only on the portion consumed and not the entire limit.
For example, if you’ve used only 25% of your credit limit, then you will be charged interest on the 25% used and not the entire credit limit.
3) Payments to distributors/suppliers at the click of a button
You can make payments with just a few taps on your smartphone via Capital Float’s convenient mobile app. You can download this app from the Play Store and the App Store for free. Upon downloading the app, you can login using your username and password. These details are provided to you at the time of your loan application. Following the login, the home screen would show you the credit limit assigned to you. Then on, you can create tranches based on the payments you need to make. Whenever you make a payment request, all you need to do, is take a photograph of the invoice with your mobile phone and upload it onto the app to avail funding. Within 24 hours, the vendor receives the payment that you requested.
4) Convenient repayment at the end of 30/60/90-day loan term
Instead of a conventional EMI plan that may burden you at the end of every month, Pay Later allows you to choose the repayment duration as per your business cash flows. Our easy, flexible plans work in accordance with your bullet repayments at the end of 30/60/90 days, so that you’re never bogged down by hefty monthly installments.
5) Zero collateral
Pay Later is a collateral-free credit product, meaning you don’t need to mortgage your property, business or personal assets, etc. to apply for the loan. All you need to do is submit the necessary documentation and choose repayment terms that are most suitable to your business. Click here to know more about the documentation required and the eligibility criteria.
6) Quick, hassle-free online application procedure
Traditional financial institutions take up to 8-12 weeks to disburse a loan. Additionally, the tedious procedures involved can burden the SME and slow down business responsiveness to opportunities. This is where Pay Later comes to your rescue. A mere 10 minutes is all it takes to fill out the online application form and to submit the necessary documentation. Through our data-driven competencies, we assess your eligibility and offer you a customized line of credit within 72 hours.
7) Get credit of up to Rs. 25 Lacs
With Pay Later, you are eligible for credit of up to Rs. 25 lakhs, which ensures that you’re never short on funds when you have to respond to a lucrative business opportunity. The exclusive facility of multiple drawdowns provides you with a higher access to working capital. By replenishing your credit limit, you can access the funds in real-time. This boosts your ability to do business leading to higher revenue.
Take your business to the next level by choosing Pay Later! Click here to get started.
Watch this video to experience the success story of Mohammad Ali Zeeshan, a travel agent who expanded his business by using Capital Float’s ‘Pay Later’.
Oct 24, 2018