In today’s world, saving money is of the utmost importance. If you are stressed about how to save money, then you are not the only one in this regard. Financial planning sounds easier than to practice. Even though it may be more exciting to spend money, you should try to practice saving for contingencies, as the future cannot be predicted and is uncertain.
Why is saving money essential?
Saving money can help you to become financially independent, providing you with security in the face of emergencies. Financial planning is necessary to set aside money for the family’s needs, such as the education of children, marriage expenses, healthcare expenses, planning for significant life events, retirement, etc. Saving money is an effective financial practice and a lifestyle choice with several proven benefits.
7 tips to save money
Though there are several ways to save money, you could consider implementing these seven tips:
- Awareness: Being aware is one of the most critical factors. If you are aware of your finances and spending habits, you will be able to consciously set more money aside.
- Prepare a budget: Begin by identifying your fixed and flexible expenses. This will help you evaluate how much of your corpus is depleted by unnecessary expenditure. After this, you can prepare a budget on a weekly or monthly basis by setting expenditure limits. This will help you pay your bills while simultaneously creating a pool of savings. You can make a budget on a weekly or monthly basis (based on your preference) with spending limits clearly defined. This budget may help you in saving extra money and restricting unnecessary expenditures.
- Curb the spendthrift in you: Many people aren’t always conscious of how lavishly they spend money on unimportant things. Tracking expenses will help you maintain a close vigil on expenses and keep the spendthrift within under control.
- Create an emergency fund: While facing emergencies, financial support in the form of insurance or loans may not be immediately available or they may not cover the need of the hour. At such times, savings come in handy to address the contingency. Therefore, make sure you set aside a fund for unforeseen expenses.
- Sell things you no longer use: There are many things we buy, and after some time, do not use any more. These items can be sold to generate funds.
- Savings calculator: Various types of savings calculators can be found online. These can be used to calculate the amount one can save over a given period of time. Using these calculators could encourage the habit of saving.
- Switch to a personal finance money management app: Spends tracking and budgeting can be made easy with personal finance management apps. Walnut is one of the most loved and rated apps in the market with over 10 million downloads. Use this app to unlock the financial planner in you.
It is necessary to save money, as it provides security, financial independence, and reduces stress. Get started on your journey of personal financial planning to achieve peace of mind and money in the bank for when you need it.
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Going the entrepreneurial route is a tough decision to take. Several people contemplate it, but only a few take that leap. Starting a business may be very challenging, but what is even tougher is running a business.
Most small businesses are faced with liquidity crunches. They are required to make payments for raw materials, overheads and staff before their receivables become due. Such businesses have not earned the confidence to ask their suppliers for a lengthy credit period. On the other hand, their customers are able to demand 30, 60 or 90 days before the invoice becomes due.
In such a scenario, small businesses find themselves at the mercy of large banks to raise short-term loans. Here are some challenges that SMEs face while applying for a short term business loan.
Estimating the Money Required: If a business underestimates the amount of money required, it would find itself unable to implement projects, execute orders, retain employees and/or realize its expansion plans. On the other hand, if a business secures a loan amount that is significantly higher than its requirements, it would be taking on an interest burden that is not justified by its bottom-line. Taking the right amount of loan can help the SME adequately address the working capital need without having a surplus or lack of funds.
Applying to Traditional Banks: Most entrepreneurs do not have the funds to invest in their businesses and keep it running for a couple of years. Borrowing from friends and family can also be tricky or simply not an option. In such scenarios, small businesses often turn to traditional financial institutions to raise short-term loans. However, these loans have a very time consuming and complex application process. There is plenty of paperwork involved. The business has to present financials in a predetermined format with supporting documents and detailed projections.
Loan Approval: The process of loan approval can be long and complicated. Banks may take several months to even reject a loan application. Mostly, loans are provided only against collateral, which the business owner may not have. Even then, lenders would conduct a thorough analysis of the financial standing of the small business. The lenders would verify all the information provided by the applicant and this takes a long time, during which the liquidity problem of the business continues to worsen. Therefore, such loans may not even be a viable option for short-term, working capital requirements.
Repayment of Loans: Most short-term business loans from traditional financial institutions have a fixed repayment schedule that is in no way linked to the cycle of receivables of the small business. Moreover, they do not allow prepayment of loans. Thus, these businesses would need to continue to bear the interest rate burden, even if it has the funds to repay the loan.
Against the backdrop of these inherent problems with securing short-term finance, technology has helped offer relief from severe liquidity crunches. FinTech companies like Capital Float rely on cutting-edge technology to offer innovative products that are aligned to the requirements and nature of small businesses. Here are some points to keep in mind while applying for a short term business loan.
Easy Application Process: The application can be sent online via a form that takes around 10 minutes to be filled. The borrower can digitally upload all the required documents.
Fast Loan Approval: The use of powerful algorithms allows Capital Float to approve or reject an application within minutes. Thus, a small business does not need to wait for several months to receive a response. Once an application has been approved, the short-term business loan is disbursed within 72 hours.
No Collateral, No Guarantor: Loans offered by Capital Float do not require small businesses to put up any collateral. Unlike traditional lenders, there is no requirement of a guarantor to validate the loan request.
Loans Designed to Suit Their Purpose: Probably the best news is that the finance products offered by Capital Float take into account the specific requirements and nature of small businesses. For instance, the Term Finance product has been designed specifically for manufacturers, traders and distributors, while the Online Seller Finance product is perfect for businesses that operate on online marketplaces. The Taxi Finance product is meant for companies that are part of the booming radio taxi business in India. Merchant Cash Advance is a loan against card receivables and Supply Chain Finance is finance against invoices from blue-chip companies.
Repayment of Loans: The repayment of loans offered by Capital Float either be in correlation to the receivables of the business or may be in the form of flexible weekly instalments. Moreover, there are no pre-closure charges, like those applied by banks and other lending institutions.
Small-term business loans are a highly effective way to finance business cash needs. However, one needs to calculate the amount carefully and then identify the right financing institute and the right product. A small business needs to opt for customized products that suit their individual requirements and offer flexible repayment options. The innovative short-term finance options available today allow small businesses to continue their daily operations without disruption and gives these enterprises confidence to grow without apprehension.
Oct 24, 2018
Written by Jubin Mehta
Capital Float is a digital finance company that provides working capital loans to underserved small business in India via a technology-led loan origination and credit underwriting platform. The Bangalore based company today announced that it has raised $13 Million in Series A financing to support the company’s rapid growth. The round was led by SAIF Partners and Sequoia Capital, with participation from existing investor Aspada.
Founded in 2013, Capital Float has created a proprietary technology platform to evaluate the financial health of SMEs and efficiently deliver working capital to a segment that is underserved by traditional banks. Businesses can apply online and get funds in less than 7 days (see how it works). The company currently lends to e-commerce merchants, small manufacturers, and B2B service providers across major cities. The company has been founded by Stanford MBAs Sashank Rishyasringa and Gaurav Hinduja and is a registered Non-Banking Finance Company (NBFC). Along with the headquarter in Bangalore, Capital Float has offices in New Delhi and Mumbai.
To date, the Capital Float platform has delivered nearly Rs. 40 Crore in loans to SMEs across 10+ cities in India. The company claims to have achieved record results in 2014 and saw a 10x increase in online applications, particularly in the e-commerce market where it has partnered with leading marketplaces such as Snapdeal, Flipkart, Amazon, PayTM and Myntra to finance small merchants selling online.
This round of funding will help expand Capital Float’s technology, enabling it to scale up nationally and launch new loan products. The company had raised a $4 Million seed round in mid-2014 from Aspada and SAIF, bringing the total capital raised thus far to Rs. 100 Crore in this fiscal.
“We started Capital Float with the belief that technology and data would be the key drivers in cracking SME financing in India,” said co-founders Gaurav Hinduja and Sashank Rishyasringa. “Over the past year, we’ve focused on building the platform to deliver what our customers want above all else – flexible and ultra-convenient access to finance that can scale with their business. By leveraging alternative data in our underwriting model, we are increasingly able to not only make faster decisions but also lend to emerging business models. We are very excited to partner with SAIF, Sequoia, and Aspada, and truly believe that we now have a world-class set of investors to propel us towards this vision.”
News piece sourced from YourStory. Read the full piece here.
Oct 24, 2018
If you are planning to embark on a new venture or are already running an enterprise, knowing all about short-term loans will serve you well.
Money plays a crucial role in your entrepreneurial journey, determining the size and scope of your business. After all, when you are brimming with ideas to cater to a market need, the last thing you want on your hands is a financial concern that could result in a compromised business opportunity.
Fortunately every problem has a solution and financial solutions for businesses come in many forms.
Reach out to experts
Should you require commercial finance, a short-term business loan could prove to be immensely useful. Wondering what exactly short-term loans are? You could ask friends who have applied for one, or approach specialized financial companies like us. You would be better placed to know more about short term business loans before applying for one. This is particularly useful if you are venturing into business for the first time as a small entrepreneur.
What is a short-term loan?
The simplest way to understand the concept of a short-term loan is to think of it as a business loan that provides immediate working capital to your company. You are given a lump sum amount that you have to repay within a period of one year, or up to five years at most. This is in contrast to other loans which can be repaid over a longer term.
Financial experts say that a short term business loans hold the potential of making or breaking your company. As per a study, conducted by the National Small Business Association, 19% of small business owners cite lack of available capital as the major challenge in their growth, and 82% of businesses fail due to improper management of cash flow.
Given its importance to small businesses, let’s take a quick look at the implications of a short-term business loan.
Factors to keep in mind
Short-term loans are easier to obtain as compared to long-term loans. You can avail of them in the alternative finance market through online lenders, and thus you can completely bypass the slow and cumbersome conventional lenders like banks. These loans are less tedious to get as they have a shorter list of qualifications and lesser paperwork. But you also need to repay them faster, usually within a year. If you manage to raise your profitability in the short term, this can be comfortably achieved.
However, there are certain points that you need to keep in mind while applying for a short-term loan. The interest rates of short-term loans are relatively higher in the commercial finance segment. Thus, it’s advisable for you to go through and understand the total cost of the loan before applying for it. Short-term loans often demand frequent payments from you. In case you don’t have regular/stable cash flow, you may find it difficult to repay your loan with weekly payments.
To help you further, here are five things you should know before applying for a short-term loan.
- Be clear about the purpose: Having a clear purpose is the pre-requisite for exploring a short-term business loan. It’s of utmost importance to be crystal clear as to the purpose of the loan—to hire new talent, expand your supplier network, invest in technology etc. If the purpose is not clear, the loan amount could well be frittered away on incidental expenses that can hold back the progress of young companies. Analyze in detail if the short-term loan is going to work for you in your current situation.
- Have an operational plan: Have a clear business strategy in place before securing a loan from a financier. It’s crucial to have a strategy that optimizes your resources. Without a proper business plan/strategy, it’s likely that you are going to find yourself in a debt-trap.
- Research interest rates and overall cost: Interest rates are an important part of any loan. It’s a smart move to know the interest rates on your dream loan early on, along with the other charges/fees that your lender may levy. A fee would not cause an increase in your interest rate, but it will be a part of your monthly payments.
- Calculate risks: As a wise entrepreneur, it is crucial that you carefully weigh all the possible risks before arriving at any decision. Analyze and ask yourself questions like: Will this loan help me in reaping the benefits? Will it generate regular cash flow? Will I be able to repay my loan in regular weekly or monthly payments?
- Know your loan duration: Apart from calculating all the risks, and having the strategy in place, it is important to know the duration of your loan and to choose the repayment tenure wisely. You can choose a slightly extended period, keeping risks and emergencies in mind, instead of choosing a short tenure.
Take a leap of faith
We understand that the journey of any venture, especially of a small business, is not an easy one. It takes a lot to take your business to a certain level and when issues like finances become a hindrance, one is likely to lose hope. But remember, today’s new age financial solutions offer a timely respite. Yet, you need to have an analytical and calculative mind, which can understand the pros and cons of the loan in order to leverage it fully.
If you are still in a dilemma, wondering how to get loan for your business or are unable to decide if a short-term business loan suits you or not, we, at Capital Float would be more than happy to assist you.
Oct 24, 2018