An organisation planning to apply for a business loan must be thoroughly aware of the general application process and the documents that need to be provided to the lender. Security is a top concern for any business today, and no enterprise will want to give copies of their ID and financial papers to questionable entities.
Even when they choose to borrow from familiar banks, the hassles of printing and photocopying documents, submitting them to a branch personally or through a reliable employee and then awaiting approval of their SME loan can be tedious. It discourages many MSMEs from approaching traditional financial institutions for funds. “How to get fastest business loan” while also following a secure procedure is a priority for SME and MSME borrowers.
Fortunately, the expectation of getting a quick business loan can now be fulfilled by FinTech lenders. These digitally active NBFCs have an abridged and systematic online application process, and funds on approved applications are provided in less than a week. Furthermore, they offer loans without requiring the borrowers to pledge any security.
FinTechs do need some documents to sanction any loan. However, businesses only need to submit the soft copies with their digital application. The primary documents required for an unsecured working capital loan or any other SME/MSME loan include:
KYC Documents of Business Owner(s) – PAN Card, passport copy or a copy of any other Photo ID that is recognised by the Government of India
Income Tax Returns (ITR) – The processed ITR document copies for the last two years
Goods and Service Tax (GST) Returns – Processed returns for the past year
Bank Statements – For the previous six months
For some particular loans taken to finance the operations of schools, medical clinics, restaurants, franchises, logistics companies and e-commerce sites, the FinTech lender may need documents specific to these verticals.
As an example, a Pvt Ltd company or LLP that seeks merchant cash finance based on the payments made through cards should also submit its card settlement statements for three months preceding the loan application. On the other hand, sole proprietors (Prop) running their own shops, salons or small restaurants can directly submit their KYC documents, IT returns, bank statements and papers that corroborate the identity of their business.
What then, about the security factor here? That indeed is important – a business loan application should only be sent from a secure website that encrypts all information loaded on its servers. FinTech companies with website domain having a lock symbol and https:// prefix are authentic lenders in the credit market.
If your business has been successfully running for almost three years, and you have been complying with the tax laws of India, your chances of fulfilling other eligibility requirements for an unsecured business loan by Capital Float are high. Just gather the soft copies of documents relevant to your enterprise, and by spending less than 15 minutes on the digital application, you can send a request for the loan. You will also be notified of the approval on the same day, and the funds reach your bank account in the next 72 hours.
To know more about our loan granting process, feel free to call at 1860 419 0999.
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New entrepreneurs with pioneering business ideas primarily need finance to keep their operations running. Banks have encouraged the growth of small-scale industries in India since independence by granting loans to promising ventures. However, the demand for funds did not quite keep up with the supply, and this resulted in the emergence of non-banking finance companies (NBFCs). The NBFCs supported the trend of industrialisation by granting business finance to those who could not procure it from banks.
The digital technology revolution in the second decade of the 21st century has given rise to a new breed of NBFC companies – the FinTech (financial technology) lenders. Employing a new models of lending, a FinTech company uses data analytics and social media tools to evaluate the creditworthiness of borrowers.
If you have begun a new venture and are seeking a loan for business expansion, you may have wondered who will be a more suitable lender – a bank or a digital NBFC. While there is more of interdependence than competition between these two sectors, you as the borrower have the privilege to choose what suits your interests the best. The loan that are you are eligible for will also be based on your business credit history and the availability of documents in support of the application.
Mentioned below are the points that will matter in the decision-making process:
Flexibility of sending application: At present, banks in India do not work on Sundays, second and fourth Saturdays and on gazetted holidays. Because you need to visit a bank branch in person while applying for business finance, it implies that there will be days when you cannot expect the process to advance towards the disbursal of your loan. Conversely, digital NBFCs by their very nature of operational medium can be accessed for business finance any day, any time. Therefore, Even if you are completely occupied with work on week days, you can apply for the business loan on a Saturday or Sunday and can still avail the loan within a time period as short as 3 days.
Loan processing time: Usually, it takes a few weeks before you actually get the required credit through a bank loan. Most of the banks in the public sector have to follow stringent rules in verifying the credibility of business organisations before they release funds into their accounts.
If you have an urgent need for money and cannot afford to wait for long, an NBFC loan from a FinTech player will be a better option. The entire line of processes from the submission of application to the disbursal of funds is digital and is therefore far quicker.
Collateral requirement: For years, banks have been lending to both individuals and businesses based on collateral that has to be pledged for security. This could be a residential or commercial property, gold holdings or any other asset that can be liquidated in case the borrower is unable to pay off the loan in the stipulated period. Even if a public sector bank looks at the regular income earnings of the borrower, it still requires collateral for additional assurance of getting back the amount lent with interest.
On the other hand, the NBFCs in digital lending industry do not ask for such guarantees through assets. They offer their loans solely on the creditworthiness of the business, which is evaluated by its dealings in the past and expertise in the field. If you are reluctant to offer collateral or simply do not have anything substantial to pledge, a FinTech company will still be willing to grant business loans in India.
Years in business: When was your business established? How old is your venture? For how many years has your business been up and running? Traditional lending institutions like banks ordinarily ask such questions when you apply for a loan through them. Generally, banks in public and private sector lend to organisations that have been operational for 3 to 5 years. Even conventional NBFCs require about the same duration before they can approve an application for a business loan. Such conditions however cannot be fulfilled by many start-ups.
The digital NBFCs have come to the rescue of enterprising individuals by granting loan for business even if their establishment has just completed a minimum operational period A one-year-old organisation with a convincing success story can persuade a FinTech company for business finance.
Nature of operations: Digital technology and social media have given rise to enterprises that were unheard of even in the late 20th century. Online platforms today sell everything from groceries and clothes to jewellery and appliances. Tickets for airlines, rail, buses and even tables in restaurants & hotel rooms are booked with a few taps on your smartphone. There are hundreds of other great business ideas that need to be uncovered. Banks and other traditional lending agencies have not yet started offering credit in full-faith to ventures of an unconventional nature.
The good news is that digital NBFCs are willing to support this generation of businesses. The FinTech industry has been increasingly lending to e-commerce companies, digital marketing organisations and other projects that use technology innovatively. Thus, all of this encourages progress and allows talented entrepreneurs to contribute to the Make in India initiative.
Prepayment penalties: Nobody wants to be debt-ridden. When you take a personal or business loan, you also wish to pay it back as soon as possible. However, the lending policies of traditional sources of finance in India have been such that borrowers are penalised if they repay early. The banks earn through interest paid each month, and to maximise this, they grant loans for longer tenures. If you have windfall gains in business and want to pay off your debt early, you may be charged at least 5% of the loan amount as penalty. That may be quite disappointing for an astute businessperson.
The new-age NBFCs have eliminated this trouble. There are no preclosure penalties when you get business loan from a digitally operating FinTech lender. What is more, their flexible repayment options give you the liberty to pay without straining your business operations or affecting your personal funds.
If the case for borrowing from a FinTech company looks convincing and positive, you can be the next business to get a loan from Capital Float. With a set of thoughtfully segregated loan products, we will be happy to support your business in its journey towards higher levels of growth. To know more about how the online NBFC business loans in India can help you, visit our website www.capitalfloat.com.
Oct 24, 2018
Pursues or desires to obtain pain of itself our because it is pain, but because occasionally can procure great pleasure.
Oct 24, 2018
The SME (small and medium enterprises) sector is an important contributor to India’s economic growth. Even though their product or service may add great value for certain people, many SMEs face challenges. This is mostly because of the lack of research and planning by the business owners about the potential opportunities and risks of the particular niche in which these units operate. Many-a-times such businesses fail to make accurate assessments of their working capital requirements and, even when they do, cannot find ways to finance them.
Some common financing mistakes made by SMEs relate to whether or not to borrow, estimating the correct amount of SME business loan required, checking the full financing cost, the time wasted on getting a loan approved and the opportunity costs.
SME Financing Options and Some Common Mistakes
The Government and the private sector have taken several initiatives to increase availability of small business loans to SMEs in India. Despite the improved availability of SME finance, many units are still struggle with easy access to finance. This is mainly due to the lack of awareness of new-age, innovative financing solutions that are offered by FinTech lenders like Capital Float.
Here are the five most common financing mistakes made by SMEs:
1. Lack of Planning: One of the gravest shortcomings of smaller businesses is the inability to plan for the longer term. Business owners tend to get so involved with daily operations, troubleshooting and trying to complete orders that they fail to step back and look at the bigger picture. In the absence of a business plan, many SMEs do not foresee the amount of cash they would require to grow and expand. They suddenly find themselves in a severe cash crunch, unable to meet their working capital needs.
A sound business plan is essential for approaching a bank for a loan. Moreover, the ability to project a cash crunch or the funds needed to grow would allow SMEs to approach banks in time, since traditional lending institutions may take months before sanctioning the loan. This is where FinTech lenders have eased the situation. By deploying cutting-edge technology, Capital Float can ensure loan approval within hours. The use of powerful algorisms helps determine the prospects of a business, easing the process of loan approval. In fact, such lenders do not require a formal business plan for sanctioning SME finance.
2.Wrong Estimation of Funds Required: Most business owners feel anxious about overestimating their loan requirement and having to pay interest on excess funds. This makes them lean towards underestimating their costs. Thus, even when a loan is disbursed, these businesses are left wanting for more. Of course, the overestimation of the loan requirement hits the bottom-line.
What such businesses need is Capital Float’s Pay Later Finance product, which offers a Predetermined credit amount. While a credit amount is determined, based on the prospects of the business, the SME has the flexibility to transfer only as much funds, as it currently needs. Repayments can be made as the business generates money, and the repayment restores the credit amount, making funds available for future requirements.
3.Hidden Charges: Several lenders burden SMEs with hidden fees. These charges may be exorbitant and the business owner may not even know when they are levied. At Capital Float, perfect transparency is maintained, with no hidden charges. In fact, unlike most traditional banking institutions that impose a fee for the early repayment of a loan, there are no prepayment charges at Capital Float.
4.Choosing the Wrong SME Finance Product: Most SMEs turn toward unorganized moneylenders or traditional banking institutions to borrow money. These loans are not tailored to the specific needs of the SMEs. New-age lenders like Capital Float offer various SME business loans that have been designed keeping in mind the needs, business model and ability to repay of different businesses.
5.Trying to Arrange Collateral: SMEs sometimes put too much at stake to get a loan or do not borrow money in the absence of collateral. Capital Float offers small business loans in India without the requirement for collateral. One can also opt for a Merchant Cash Advance, which converts accounts receivables of a business to quick and usable funds.
Apart from these common mistakes made by small businesses, the timing of the loan approval and receipt of funds plays a critical role in the success of SMEs. Any delay in arranging the necessary funds can prove catastrophic for a business. This is mainly because SMEs often do not have sufficient negotiating power with their suppliers. They need to make payments for raw materials long before they can raise an invoice to their customers.
The rapid evolution of technology to address SME finance needs have revolutionized the lending space. The objective of FinTech lenders is to eliminate the liquidity issues faced by the SME sector by ensuring the quick approval and disbursal of the loan amount, while also making it easier for these smaller businesses to repay the loan. However, to make use of these advantages, SMEs need to be made aware of such options.
Oct 24, 2018