The COVID-19 pandemic is an unforeseen shock for the Indian economy. The country is expected to experience a lengthy economic recession with extended lockdowns in several states. Due to the Coronavirus outbreak, the global economic crisis, and subsequent instability in production and supply chains is also likely to be perpetuated.
How are the people of India affected?
Coronavirus has disrupted the lives of millions of Indians. Incomes have reduced and several people are experiencing a financial crunch, and as a result, it has become challenging for households as well. Many people have lost their jobs; many others are struggling to run their businesses.
Has the Government extended dates for filing ITR?
In the context of COVID-19 and to provide the people with immediate relief, the Government, in a press conference on May 13, 2020, has announced that the Income Tax Return (ITR) filing deadline has been extended to November 30, 2020 for the financial year 2019-20. Earlier, it was decided that the deadline would be 31st July 2020. But, looking at the condition of the economy, the Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman decided to extend the date of the deadline for filing of ITR even further to November 30.
The Government has not only extended the date for ITR filing but has also extended the tax audit from September 30, 2020 to October 31, 2020. The TDS and TCS rates were reduced by 25% to provide more funds to the taxpayers for the period between 14 May to 31 March. Furthermore, in April 2020, they announced that the pending income tax refunds up to INR five lakhs would be released to the taxpayers to benefit them in these times of crisis.
The Government has authorized certain financial measures to increase the liquidity of tax paying individuals in India. Prudent decision-making and personal financial management will be key to ensuring that funds are available to run households for the foreseeable future and in case of contingencies.
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While dining at a restaurant, customers either settle the bill through cash or by using a credit or debit card. Similarly, online shopping also offers the advantage of choice of paying by cash or card. In both cases, apart from offering quality service and/or products, the customer experience is further enhanced when a merchant offers the convenience of choice. Keeping customer satisfaction in mind, the use of card payment devices has become a norm for modern-day businesses. After all, a business’ success largely depends on how happy its customers are. A well-run business attracts more customers and eventually ensures long-term gains. These include better profit margins, wider customer base, higher brand value, etc.
One of the key factors that makes all this possible for a business, regardless of its size, is working capital. A travel agency runs very differently from, let’s say, a flourishing B2B business. However, the need for access to quick finance is something they have in common. Given that swiping of credit or debit cards is fast becoming commonplace, businesses are waking up to the fact that they can utilize point-of-sale card machines to their advantage. In other words, they can use the cash flowing into their merchant account from card swipes to avail of merchant credit advance.
Merchant cash advance companies ensure a quicker and easy access to money. Turning to a conventional lender for working capital needs is not always possible for a small business, nor in most cases is it simple. This swings the spotlight on merchant cash advance loans. A tailor-made financial product, Capital Float’s merchant cash advance option has benefited several Small and Medium Enterprises (SMEs).
Our association with several point-of-sale card machine vendors like Mswipe, ICICI Merchant Services, Pine Labs, Bijlipay and MRL Posnet enables a wide range of merchants to obtain customized working capital solutions from us in the form of a merchant cash advance loan.
Approaching merchant cash advance companies like Capital Float makes sound sense for SMEs in search of quick access to funds. Here are 5 important reasons why SMEs should opt for merchant cash advance loans over other types.
1- Broader loan range: Capital Float’s merchant cash advance loan offers SMEs the flexibility of choosing the exact amount of capital they need. Addressing credit requirements ranging from as low as Rs. 1 lakh to as high as Rs. 3 crores, this is a customized financing option based on the monthly card settlement of a business. A merchant credit advance loan is an ideal solution for those who have consistent card inflows as well as short-term investment requirements.
2- Flexible loan tenure: Apart from offering the advantage of cashless transactions, point-of-sale machines can help speed up access to working capital. Capital Float’s merchant cash advance loan, based on card swipes comes with the benefit of flexible loan tenure. SMEs can opt for a 6-month or 12-month repayment term, making it easier to pay back the loan at their convenience.
Besides, payment to the merchant cash advance company varies directly with the merchant’s sales volumes. This means SMEs have the option of paying less during a low season. Additionally, with this innovative alternative, they need not pay monthly EMIs which are the norm in traditional small business loans; they can pay weekly or fortnightly installments too.
3-Get up to 200% of your monthly card settlement: Merchant credit advance loans work like a charm for retail businesses as well as restaurateurs. Given the high extent of card swipes in today’s digitized and connected world, one can receive financing up to 200% of monthly sales from card payment machines. Higher card swipes can mean a higher loan amount.
4- Apply anytime, anywhere: Typically, loan applications are a laborious process requiring several trips to the bank. But alternative financing options like merchant credit advance are anything but that. In fact, merchant cash advance companies offer a quick and hassle-free online application process, with forms that can be filled and uploaded anytime, from anywhere. The entire process of filling out an application form and submitting the required documents takes just 10 minutes. It is time to bid adieu to lengthy procedures and paperwork required for a conventional loan.
What’s more, at Capital Float we understand the value of quick access to credit. Meeting an unexpected business expense or leveraging a lucrative business opportunity can be a challenge for well-managed businesses. Utilizing innovative technology for speeding up loan approvals, Capital Float disburses merchant cash advance loans within 72 hours.
5. Simple pre-requisites: Merchant credit advance is something SMEs can easily apply and avail of. The prerequisites are simple and include the following qualifiers:
- Operational history of one year
- Minimum turnover of Rs 20,00,000
- Card acceptance vintage of six months
- Minimum monthly card volume of Rs 1,00,000
- Minimum of six settlements per month
Personalized and transparent
Capital Float fully comprehends the fact that loan products need to be customized according to the needs of a business. Therefore, going for a financing option like merchant cash advance loan makes sound sense. SMEs receive exactly what they are looking for in terms of working capital; and the merchant credit advance is convenient in terms of repayment.
Capital Float believes in conducting business in a transparent manner; we do not levy any kind of hidden charge whatsoever. There is no pre-closure penalty either — another advantage in the merchant cash advance loan. The borrower is only obligated to pay a processing fee of up to 2% of the loan.
Capital Float aims to remove financial barriers that stand between SMEs and growth by providing easy access to capital. Our merchant cash advance loans are a simple and secure means to bridge the credit gap that small businesses routinely face.
Oct 24, 2018
Businesses need additional finances either for growth in terms of scale or for expansion into newer product categories, or for geographical expansion. Sometimes, additional finances are also required for day-to-day operations. Going the traditional route via banks and financial institutions may not always work, especially for small business that are still in the process of building up their brand and market presence. The merchant can also withdraw from his/ her working capital loan. But, if the working capital limits are reached, and if the bank is unwilling to extend more working capital, then the merchant has to look for funds from other sources.
Fortunately, a whole new option of loans based on card swipes at POS terminals offers a great alternative to traditional finance. “Merchant cash advance” is a form of finance where sales from card machines can be used to raise loans. Merchants who allow their customers to pay with a credit or debit card can avail of such credit advance. Merchant cash advance loans are repaid by the POS partner on behalf of the borrower as a percentage of every sale registered on the POS machine.
When merchants accept credit/debit cards as a form of payment, the cards are swiped on a point-of-sale (PoS) terminal. Once the card and the sale amount is verified, the transaction is completed by entering a PIN number. Such sales are actually credit sales as banks credit the sale amount on the next day, or as decided with the merchant, after they deduct transaction charges.
There are several reasons why merchant cash advance is a great alternative to banks and other traditional lenders. Apart from the lengthy process and paperwork, the terms of traditional credit are much tougher for small businesses that have just set out on their entrepreneurial journey or are about to move into an expansion phase. Here is a quick look at why merchant cash advance loans are a better option for SMEs:
No collateral required
Merchant Cash Advance is a completely unsecured loan. The borrower isn’t required to pledge their property or assets to avail themselves of the loan.
Quick, easy loan disbursal
Merchant cash advance loans are usually disbursed easily and quickly as the onus to repay the amount is with the bank that provides the PoS terminal. Thus, merchant cash advance companies have to only ensure the regularity of the sales and the commitment of the merchant to be in business for the duration of the loan.
The borrower can apply for the loan by using a mobile device or a desktop, as long as the device is connected to the internet. The documents required can be scanned and uploaded at the time of the application. The borrower isn’t required to visit our office. This hassle-free application process provides for a comfortable experience to the borrower.
As the onus to pay the instalment is with the provider of the PoS terminal, which is usually a bank, the merchant cash advance companies are reasonably assured of receiving repayments regularly, provided the merchant’s business has no issues. When the PoS terminal providers credit the merchant’s account with the proceeds of their credit card sales, they transfer a fixed percentage of these proceeds to merchant cash advance companies that have provided the merchant cash advance.
Flexibility of Repayment
The repayment of merchant cash advance loans can be pegged to the sales volumes. As a result, merchant can direct their PoS providers to pay less during low seasons. In the case of merchant cash advance loans, the merchants may also have the flexibility to structure their repayments to suit their ability to pay. Instead of making monthly repayments of the loan, they can opt to repay in weekly or fortnightly instalments as well.
Advance as a multiple of card sales
Merchant cash advance loans are ideal for merchants who have consistent credit/debit card sales. Merchant cash advance companies will first evaluate the credit worthiness of the merchant by verifying their past sales and business performance. Once merchant cash advance companies are satisfied, they will decide the basis of the loan advance and how much they can lend to the merchant. For example, Capital Float uses the monthly card settlement amount as the basis for deciding the loan amount. We lend up to 200% of the monthly sales made by the borrower from card swipes.
No pre-closure charges
Capital Float doesn’t charge the borrower any pre-closure charges if the borrower chooses to close the loan ahead of the agreed upon tenure. Additionally, we maintain complete transparency in fees and charges. The borrower is required to pay up to 2% of the loan amount as processing fees, while applying for the loan.
The usage of PoS terminals has significantly increased after the recent demonetization drive. The Government of India is pushing Indian banks to install PoS terminals so that the nation can progress towards becoming a cashless economy. With cashless transactions set to rise with card swipes and PoS machines, merchant cash advance loans will soon become a popular way of raising short-term funds to finance working capital requirements.
Capital Float is one of the few financial companies in India to offer merchant cash advance loans. We have already tied up with POS terminal vendors like Pine Labs, ICICI Merchant Services, Mswipe, MRL Posnet, Bijlipay, and more. We provide a merchant cash advance up to Rs. 1 crore for a convenient tenure of six months to one year.
Oct 24, 2018
Every small and medium sized enterprise requires a certain amount of working capital to ensure smooth business operations. Working capital is nothing but the equity or funds available to owners to meet their short-term financial commitments and expenditures. Calculated by subtracting the value of current liabilities from the current assets of a business, the available capital stands testimony to the financial health and efficiency of an enterprise, particularly in the short-term perspective.
There are various types of working capital such as fixed working capital, temporary working capital, gross and net working capital, etc. to name a few. Since it is the fundamental building block for any enterprise, working capital is a basic requirement that can never be compromised upon. This is why Working Capital Loans are regular finance products offered by any banking entity, and is the most demanded of loans by small, medium and large enterprises.
Benefits of Working Capital Loans
Working capital loans are short term financing options that are used to cover accounts payables, wages and investments on short term assets. SMEs whose business are reliant on seasonality or manufacturers who depend on traders can opt for these loans until their business picks up or they receive payments. Since working capital loans can be used as the SME deems fit and can be availed for shorter terms, they are extremely beneficial to resolve any immediate financial crunch. Moreover, since these loans are disbursed quickly with fewer documentation requirements, owners can be relatively stress-free regarding daily/monthly expenses of wages, purchases, infrastructure bills, etc. till they can keep their businesses afloat.
Types of Working Capital Loans
Though all businesses are eligible to get working capital loans, finance providers will require business owners to meet certain prerequisites or conditions, depending on the scale of their operations. Traditionally, a security deposit or guarantee is required of them, and the working capital loan offered by lending institutions will significantly depend on the enterprise’s credit repayment history, among other things. However, several NBFCs now provide unsecured loans after an analysis of the business’ books. New-age lenders are now comfortable with extending collateral-free working capital loans to SMEs and even micro businesses.
Some of the most common working capital loans available for businesses are:
1. Short Term Loans
These loans are disbursed at a fixed rate of interest for a fixed payment period, which is usually up to 12 months.
2. Bank Overdraft and Loan Facility
The availability and terms of this type of loan are wholly dependent on an enterprise’s relationship with the lender. For this type of loans, the rates of interest are usually one or two percent above the prime interest rate levied by the lender.
3. Account Receivable Loans
Being the most popular of working capital loans, account receivable loans are most sought out by SMEs. This type of finance is the best choice for businesses requiring equity to meet expenditures such as fulfilling a sales contract, investing in an asset, etc.
Features of a Working Capital Loan
There are several banks and NBFCs in India licensed to offer working capital loans to businesses. Smart SMEs would thoroughly research parameters like loan tenures, rates of interest, repayment terms, security requirements, etc. before opting for a lender, as this choice will have a lasting impact on the way you conduct business and on larger credit needs in the future.
Loan Eligibility – The number of years the business has been in operation, your CIBIL score and annual business turnover are some factors that will affect the loan eligibility, amount, tenure and rate of interest charged on your working capital loan.
Availing the Loan– Below are some points that an SME should know before entering into discussions with an NBFC for working capital loans.
1. Most working capital loans are offered for a 12-month tenure.
2. Depending on the loan amount, the scale of business and the kind of lender, an interest rate of 12-16% per annum will be charged on the loan amount.
3. Traditionally, lenders would require collateral from SMEs in return for providing a loan. Even today, some lenders need a guarantee to know that the business they are investing capital into is up and running and if the loan amount will be returned.
4. However, several NBFCs now offer collateral-free loans to help SMEs manage their short-term expenditures without compromising on business goals. But the terms and conditions of the NBFC will dictate the type of loan an SME can avail.
5. Remember, bankers and lenders use the working capital ratio as a quick way to determine a company’s financial health.
Documents & Other Prerequisites – An SME needs to furnish certain documents to confirm the intent of repayment or as a measure of security as per the NBFC’s bylaws. Another prerequisite that business houses may require is to be registered under The Company Act 2013 of India as either of the following:
1. sole proprietorship
3. private limited firm
4. public limited firm
KYC documents, ITR financial statements, VAT returns, etc. are some documents that you will be required to show or upload while applying for a loan.
Choosing a Lender – Since the future of a business, its longevity and its ability to operate efficiently could rest on the working capital loan and the relationship with the lender, it is advisable to choose a reputable lender. Look for lenders who offer simple online documentation, customized business loans and quick disbursal before proceeding with one. It is always safe to choose a well-known lender with a modern outlook and flexible conditions to ensure a seamless experience.
It is clear that a company’s balance sheet indicates the amount of working capital available. This capital, equity or funds meet the necessary day-to-day expenses of every organization and are crucial to an enterprise’s success. Though big businesses are more likely to keep aside abundant working capital to meet their expenditures, startups and SMEs can avail working capital loans to ensure that there are no gaps in meeting expenditures to keep their enterprises running smoothly.
Capital Float is a reputable digital lender with a deep understanding of the unique requirements of a business. Our loan packages are designed to fulfil every short term expense that you will come across.
Oct 24, 2018