CIBIL Score for Business Loan – Check Minimum Credit Score

Minimum CIBIL Score for Business Loan

Businesses require huge amounts of money. Risk-taking entrepreneurs stake their lives and careers on the line to start companies. These businesses and the job opportunities they introduce to the economy are part of the economic lifecycle. Loans fuel such businesses and good loans with attractive interest rates enable people in business to engage in healthy economic trading. But not everyone is positioned to get good loans.

Business loans are available for these risk-taking individuals, but many of them don’t even know where to start.

The Credit Information Bureau of India Limited, or CIBIL, is the oldest function of the Reserve Bank of India to disperse credit information to banks and financial institutions.

What are CIBIL scores and CIBIL ranks?

To assess the credibility of a person or business, the payment history of the individual or business is gauged and quantified into a 3 digit number known as the CIBIL score.

CIBIL Score

Meaning

850 to 900

Excellent score. Perfect score for loan approval.

750 to 850

80% chance of loan approval.

700 to 750

Good for secured loans. Unsecured loans may require more checks by the bank.

500 to 700

Personal loans may be difficult to get. Interest rates will be higher.

300 to 500

Close to impossible to obtain any loans.

Your CIBIL Company Credit Report, or CCR, is a record of payment history compiled from multiple institutions. These are regarded as reputational collaterals. For your CIBIL rank, it ranges from 1 to 10. The closer the score to 1, the better the probability of securing a loan. A score of 10 means a heaping pile of trouble. Bear in mind, a CIBIL score is applicable to individuals seeking loans. CCR is the term that is applicable to businesses seeking loans.

Now that you are familiar with what a CIBIL score for business loan and rank are, and where on its spectrum you would like to be, it is time to understand what brings down your score and what brings it up. Bringing up your CIBIL score for business loan.

Putting it simply, the better your history in dealing with past credits and loans, the better your CIBIL score for business loan will be.

What affects your CIBIL score?

You score has nothing whatsoever to do with the following:

  • Investment account information
  • Savings held in the past
  • Fixed deposit accounts
  • Trading accounts
  • Current account
  • Savings account
  • Investment accounts
  • Your education level
  • Your annual income
  • Your gender
  • Your race
  • Your ethnicity

Your score is ONLY considered based on the following:

Factor

Weightage

Your credit history

30% weightage

Utilization of credit

25% weightage
Credit duration and mix

25% weightage

Misc factors

25% weightage

The score generated by the TransUnion CIBIL authority is the only indicator of your score. Each credit bureau uses its own specialised scoring methodology that has nothing to do with CIBIL, so don’t be confused by multiple credit bureaus. The TransUnion CIBIL agency is the one you want.

How are scores checked?

Checking your score is important, and keeping up with your payment history will allow you to do that. However, there are times when checking can hurt your actual score! So how do you avoid this?

  • Soft checks
  • Hard checks

Soft inquiries do not hurt your score. Soft inquiries are when an enquiry is requested by:

  • Credit bureaus
  • Third party authorised institutes

An infinite amount of these checks are okay and do nothing to affect your score.

However, when a request is made by institutes such as:

  • Banks
  • Credit card companies
  • Various creditors

Your score undergoes damage. This is called a hard enquiry, and you must avoid them as much as possible.

However, please don’t worry if this seems too complicated. You are entitled to a free credit report annually by the TransUnion CIBIL authority, so make sure to keep that in mind. The first one is free, but you are charged for any further reports in a year.

There are no fast and easy shortcuts to this, however. Keep in mind that your financial behaviour for the duration of 6-12 months is analysed before arriving at your score. So the only way to improve your score is through actual perseverance, dedication and hard work.

How to improve your credit score?

Let’s explore some of the methods of improving your score.

1. Focus on your credit utilisation

Utilisation here means how much you use of the credit limit you have on your card. Surpassing 40% of your limit shows that you have a high need for credit and raises the possibility that this high usage of credit means possible defaulting in future. Get another card and spread out your credit utilisation. Never surpass 30% to be safe.  40% is the upper cutoff. The ones that don’t need money are often the ones that are granted money. Also, here you can take measures to increase your credit limit so that you will never surpass 30% as well.

2. Outstanding balance

Just paying the minimum is a terrible way to increase your score. Pay off the unpaid balance as soon as possible, and pay off the entire balance at that.

The facts that your balance is carrying over to the next month is an indicator that you are unable to pay your debts fully and on time, and this hurts your score. Do whatever you can to lawfully pay off the balance to see your numbers start improving. Seek assistance from benevolent friends and family and other resources you have.

3. New credit applications

For the next year, don’t apply for any new loans. Loan thirsty individuals are seen in a negative light. Each loan mandates a recheck of your CIBIL score, and this counts as a hard check. As discussed before, you want to avoid hard checks at all costs.

The Bottom Line:

So there you have it. Bear in mind, even if you do happen to have a low score, don’t fret too much. You might still get a loan, albeit at a higher interest rate. These measures simply ensure you the best position to seek loans. Keeping these facts in mind will allow you to gain control over your CIBIL rank/score and allow you to nurture and grow your business into an indispensable part of the economy one day.

CIBIL Score for Business Loan FAQs:

1. What does NA or NH denote in my CIBIL score for business loan?

NA and NH signify that you might not have a credit history to be assigned a score. You either have no credit card activity in the past couple of years or are lacking credit card exposure.

2. Can CIBIL change or delete my records?

No. CIBIL does not have the power to delete your records on their own.

3. Is there a defaulter list for CIBIL?

CIBIL does not possess or maintain a list of defaulters.

4. What is CIBIL 2.0?

CIBIL 2.0 is the latest in measuring CIBIL scores. It has been created with changing industry trends in mind. Your scores in the 2.0 system varies from the scores given in the 1.0 system.

Read More:

Maintaining a Credit Score for a SME

Tips to Increase Your Small or Medium Business’s Credit Score

How to Get a Small Business Loan for a Startup

Small Business Loan to Start a Business

For a new entrepreneur, one of the biggest hurdles to resolve and overcome is the need for capital. Funds are critical to any business venture. Finding ways to raise money can sometimes become a full-time occupation for a business owner. A business loan can be a very important supplement to the lifeblood of a company.

There are many ways that startup capital can be raised. There is the option of:

  1. Going for a bank (most bank offer small business loans these days)
  2. Exploring and applying to non-banking financial institutions
  3. Using alternative methods such as crowd funding
  4. Approaching angel investors and venture capitalists

For most new businesses the preferred method, out of above, is to apply for loans with banks and other alternative lending institutions.

Eligibility for Startup Business Loan:

While a business loan can be applied for with a government or private bank or with non-banking financial companies, there are some basic eligibility requirements which need to be met. These requirements vary from institution to institution. For example, government loan schemes often have stringent requirements and do no offer the best business loans for new businesses. Since these schemes are typically refinanced by public and private sector banks, the process is slow and full of hassles. On the other hand, NBFCs have startup loan schemes which offer instant business loans with personalized terms. To get a startup business loan from an NBFC like Lendingkart, you need to meet the following eligibility requirements.

  • An established business that has been running for more than 6 months.
  • A minimum turnover of ₹ 90,000 or more in the past 3 months.
  • The type of business should not be categorized under the blacklisted/excluded list for SBA finance.
  • The physical location of the enterprise should not be in the negative location list.
  • The business should not be a trust, NGO or charitable institution.

How to Get a Small Business Loan to Start a Business

As a startup or a business idea in a nascent stage, the best bet to raise funds lies in non-banking financial institutions. It’s recommended to direct one’s energies towards acquiring capital from alternative lenders rather than traditional banks.

Most banks prefer to give loans to small businesses that are already in existence as opposed to someone who is just starting out. Banks prefer to cover risk and it’s for this reason that the documentation and evaluation processes are long drawn and rather stringent. For a new business, sometimes it can be difficult to meet all the requirements. This greatly affects the chances of getting the loan approved.

Startup Business Loan Interest Rate

Interest rates are one of the major concerns for a small business owner applying for a business loan. Higher interest rates can raise Both the total repayable amount and the money you pay in each EMI. Since most small businesses are operating at very thin to non-existent margins, high interest rates on business loans can be a major deterring factor for them. In extreme cases, not having access to institutional finance can ultimately cause a startup to cease operations.

Now it is an established fact that startup business loans without collateral have higher interest rates due to the increased risk of default for a lender. However, not every startup owner has significant personal or business assets to collateralize. In such cases, FinTech lenders like Lendingkart Finance can help a startup to lower interest rates on a business loan. Since, FinTech firms operate online, they are able to save money that would go in man-hours. These savings are passed onto the customers in the form of lower interest rates. With Lendingkart, you can get interest rates which are customized for your business’s financial profile.

Document & Requirements for Startup Business Loan

The documents required for getting a loan for startup business also vary from lender to lender. Where a traditional bank or government business loan scheme relies heavily on documentation, a FinTech lender relies on the relevant business and KYC documents instead of asking for unnecessary paperwork. Here again, citing the example of the NBFC, Lendingkart Finance, we are sharing a basic list of documents required for startup loans.

  • Bank statement for the last 6 to 12 months.
  • Proof of business registration such as business registration certificate, GST filing, Gumastadhara, trade license, drug license, TIN or VAT registration.
  • Copy of proprietor’s PAN Card.
  • Copy of proprietor’s Aadhar Card.
  • Copy of the Partnership Deed (if applicable).
  • Copy of the company PAN Card.

All these documents are required in the digital format as Lendingkart’s business loan application process in online ‘only’.

Coming to the benefits of applying for business loans with alternative lenders. They make the process rather hassle-free and easy to get through. Some of the advantages that non-financial banking institutions offer are:

  1. Slightly more flexible requirements and eligibility criteria
  2. Possibility of applying online very quickly
  3. Quick turnaround time on loan approvals
  4. Instant loan disbursement after approvals

Amongst all these the leniency on the eligibility criteria as well as requirements are the most beneficial.

It is helpful to have lenders who will be willing to consider giving out money to owners who may not have a detailed and long credit history. Your top pick should be lenders who focus on your business idea and go-to-market strategy rather than those who focus on cash flow history. Armed with a solid a dynamic business plan, the loan can be applied for still.

Process to get a Small Business Loan to Start a Business

There are different types of business loans available and depending upon the requirement of the business, a relevant one can be sought and applied for. Some popular options of business loan include working capital loans, startup loans, cash advance loans etc.

The first step is to determine how much money is needed and what it is needed for. This will go into the business plan that will be evaluated during the loan approval process.

Once the amount has been determined, the next step is to do some research and seek out the available options in terms of lenders in the market. Choosing a lender is also a process that requires time and effort. Things like credibility of the lender (reputation in the market), interest rate being offered, support system on offer, options of how loans can be re-paid, process of loan application etc. need to be factored in before choosing the one(s) which would be applied for.

Once identified, the next step is to get all the required documentation ready and up to the mark. A great business plan which details out information about the business idea, the profitability of the idea, the scaling plan, the vision behind the idea, projections regarding staff and infrastructure as well as the marketing strategy. A clear and transparent business plan goes a long way in putting the odds in the favorable position.

The final step is to apply and go through the process.

As mentioned, the turnaround time with non-banking financial institutions is rather quick and if all is okay, the loan should come through within a fortnight or less.

Of course, if you have a business that is already 6 months old or more and has a revenue of INR 12 lakhs or more, you can always apply for a working capital loan at Lendingkart! They have a minimum turnaround time of 3 days for eligible businesses.

How to use a Startup Business Loan

The benefits of getting a startup business loans are numerous. You can utilize the money for purposes like business expansion, restocking inventory, working capital management etc.

Startup business loans from NBFCs like Lendingkart give you enough money to invest in multiple things in one go. They have a ticket value which can go up to ₹ 2 crore, helping you launch projects at a faster pace and get into the profit zone.

However, it is also important to remember that you should use the loan funds expressly for the purpose defined in your planning. Spending the loan money unwisely can result into a debt trap for your fledgling business.

What do you think about this article? Please let us know in the comments. If you need to know more about how important it is to choose the right business loan, you can read our article here. We have also written in detail about small business financing options in India and you can read about it here.

Government MSME Schemes for Entrepreneurs

The Government of India offers some schemes to the MSME’s as they lack in resources and Technology and need assistance from big companies. Below are the schemes offered by the Indian government to Micro, Small and Medium Enterprises.

MSME Schemes – Launched by the Indian Government for Entrepreneurs

  • Udyog Aadhaar memorandum
  • Zero Defect Zero Effect
  • Quality Management Standards & Quality technology Tools
  • Grievance Monitoring System
  • Incubation
  • Credit Linked Capital Subsidy Scheme
  • Women Entrepreneurship

1. Udyog Aadhaar memorandum
Provides ease in availing credit, loans, and subsidies from the government with mandatory Aadhaar card.

2. Zero Defect Zero Effect
Manufacturers can be eligible for certain rebates and concessions if they manufacture export goods that adhere to certain standards.

3. Quality Management Standards & Quality technology Tools
Gives SMEs opportunities to learn to maintain quality standards while implementing new technologies through various seminars, campaigns, activities etc.

4. Grievance Monitoring System
Offers a platform for business owners to check the status of their complaints and open them if dissatisfied with the outcome.

5. Incubation
75% to 80% of the project cost can be financed by the government to help innovators with implementing new design, ideas or products.

6. Credit Linked Capital Subsidy Scheme
Capital subsidy for SMEs to upgrade obsolete technology and have better means to do their business.

7. Women Entrepreneurship
Only 14% Women amongst the total entrepreneurs in India. To enable women to start, manage and expand their business, the scheme provides capital, counselling, training and delivery techniques.

msme schemes india

Top 5 Government Loan Schemes for Small Businesses in India

India was recently termed as the only, truly emerging market in the world at the moment. A part of this growth is fueled by the micro, small and medium enterprises of the country. The SME sector contributes over 40% of the total GDP and remains a critical source of employment for the India’s growing population. Recognizing the importance of SME growth in the post-demonetization era, the government has started some new business loan schemes and boosted other existing ones. Here are the top five business loan schemes from the government of India that you can avail for small business finance.

MSME Business Loans in 59 Minutes

Perhaps the most talked about business loan scheme right now is the ‘MSME Business Loans in 59 Minutes’, a scheme first announced in September 2018. The loans under this scheme are given for financial assistance and encouragement of MSME growth in the country. Both new and existing business can utilize the scheme for a financial assistance up to ₹ 1 crore. The actual process takes 8-12 days to complete, while the approval or disapproval is granted within the first 59 minutes of application. It is a refinancing scheme, wherein five authorized public sector banks will grant the funds. The interest rate depends on the nature of your business and credit rating. No information has been given on subsidizing the principal amount or interest subvention.

To apply for business loan under this scheme, you need GST verifications, Income Tax verifications, bank account statements for the last 6-months, ownership related documentation, and KYC details. More information on application and approvals can be sought by visiting the SIDBI portal for this business loan.

MUDRA Loans

Micro-units Development and Refinance Agency (MUDRA) is an organisation established by the government of India to provide business finance to micro-business units. The loans under the scheme are given on the pretext of ‘funding the unfunded’. Since small companies and startups are often left to their own devices for financing their venture, the government has created the concept of low-cost credit to such undertakings. MUDRA Loans are also a refinanced business loans, approved and disbursed through public sector banks, private sector banks, co-operative societies, small banks, scheduled commercial banks and rural banks that come under the scheme. The loans are generally given to micro or small businesses operating in the manufacturing, trading and services sector. The MUDRA Loans are structured as under,

  • Sishu Loans up to Rs. 50,000/-
  • Kishor Loans up to Rs. 5,00,000/-
  • Tarun Loans up to Rs. 10,00,000/-

Credit Guarantee Fund Scheme for Micro and Small Enterprises

The CGMSE was first launched in the year 2000 as a monetary support scheme for micro and small enterprises. It offers collateral-free credit for both new and existing business units that satisfy its eligibility criteria. The scheme provides working capital loans up to ₹ 10 lakhs without any collateral. However, for all credit facilities above ₹ 10 lakhs and up to ₹ 1 crore only primary security or mortgage of land and building associated with the building is obtained and such eligible accounts are covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Asset created through the credit facility which are associated with the business unit are also considered as security when the loan amount exceeds ₹ 10 lakhs.

The business loans under this scheme are financed by various public and private sector banks covered under the scheme.

National Small Industries Corporation Subsidy

The NSIC subsidy for small businesses offers two kinds of financial benefits – Raw Material Assistance and Marketing Assistance. Under the raw material assistance scheme of NSIC, both indigenous and imported raw materials are covered. Under the marketing support, funds are given to SMEs for enhancing their competitiveness and the market value of their products and services. The NSIC is mainly focused on funding small and medium enterprises who wish to improve / grow their manufacturing quality and quantity.

Credit Link Capital Subsidy Scheme for Technology Upgradation

This scheme allows small businesses to upgrade their process by financing technological upgradation. The technological upgradation can be related to numerous processes within the organization, such as manufacturing, marketing, supply chain etc. Through the CLCSS scheme, the government aims to reduce the cost of production of goods and services for small and medium enterprises, thus allowing them to remain price competitive in local and international markets. The scheme is run by the Ministry of Small-Scale Industries. The CLCSS offers an up-front capital subsidy of 15% for eligible business. However, there is a cap to the maximum amount that can be availed as subsidy under the scheme, which is set at ₹ 15 lakhs. Sole proprietorships, partnership firms, co-operative, private and public limited companies come under the ambit of this business loan scheme.

An Alternative: Quick Business Loans from Lendingkart

While all these schemes display the commitment of the past and present Indian governments for developing the economy of the nation, there is much that needs to be done to make the schemes effective. For example, the refinancing and subsidy model used by the government takes away the ‘quick’ factor from business loans touted by the schemes. Since these loans are essentially funded by the government sponsored banks, the turnaround time is in weeks or even months, which is detrimental for a small business owner looking for quick business finance. Even the most ambitious of all these schemes, the 59 Minutes Loan for MSMEs, takes up to 2 weeks in reality.

On the other hand, MSME finance by non-banking financial companies like Lendingkart is approved and disbursed within 72 hours. This is done by combining business analytics and online technologies for loan approval and disbursal instead of relying on paperwork and age-old processing techniques. For instance, Lendingkart offers business loans online through their website or mobile app. Simply log-in to apply for a business loan, get a same- day approval, accept the quote and upload your documents digitally for verification. The entire process hardly takes 10-minutes of your time and the verification is completed within 3 working days by Lendingkart. So, you have the funds ready for use within a quarter of the time it takes a government scheme to disburse a loan.

To apply for a business loan with Lendingkart in 3 simple steps, visit us at www.lendingkart.com.

Business Loan Apply Online

Business Loan for Grocery Store – How LendingKart helped Pawan Singh Business

Business Loan for Grocery Store

There are times when you want to unshackle and set yourself free from a regular job. The idea of starting your own business from scratch can give a kick like no other thing in this world. Also, the Indian start-up ecosystem is thriving making it the best time to take that leap of faith.

Unlike earlier, you don’t have to wait for years before you decide to quit a regular job for the business.  With the ease in financing and institutions lending business owners, many people are undertaking an entrepreneurial journey. NBFCs and online lenders such as get Lendingkart have also proved to be a boon for those trying to succeed in their businesses.

Pawan Singh, a resident of Delhi, was looking to expand his grocery store business which he started a year back but could not afford due to paucity of funds. However, this year he took that bet and expanded the venture with a quick business loan from Lendingkart. Singh didn’t have to spend much energy and efforts in finding access to capital for the grocery store. He simply checked online and discovered LendingKart was offering business loans for a shorter duration. He went ahead and got the loan sanctioned within a span of four days. Today he takes pride in his grocery store which is in the expansion mode after it added a new bakery section.

Like Singh, you can apply for a quick business loan online at the click of a button. Such quick business loans are easily approved within three to five working days and give the much-needed acceleration to your business.

How to apply for a business loan in Lendingkart?

If you have an established business which has been in operations for more than six months, you are eligible for a loan through Lendingkart. You can also check on other eligibility criteria for a business loan on the website. The online lender offers 50,000 up to 2 crore loans to eligible SMEs which can be used for expansion of your venture. Singh had applied for a Rs 10 lakh loan for which he pays a monthly EMI of around Rs 91K for duration of 12 months. You also need to have a minimum turnover of 90,000 or more in the three months preceding your loan application. Make sure your business doesn’t fall under the blacklisted/excluded list for SBA finance. Also, check on the physical location of your enterprise as it should not be in the negative location list. In case you are not sure about the category or location, you can directly contact Lendingkart to confirm your eligibility.

How much time does it take for loan approval?

It can happen at the click of a button provided you have the requisite documents. You need to create an online account on the platform and apply for a loan based on your financial information. Once you accept the quote you have to upload documents for final verification. Your business loan through the online platform gets approved within three days unlike banks which might take 8-10 days for approval. The platform has a specific business loan scheme under which a loan can be approved within 59 minutes. The loans are processed faster as the eligibility requirements are not complicated and require minimum documentation. A business owner can skip unnecessary paperwork on the platform which otherwise delays approval process. You have to pay a processing fee of 1-2% depending on the principal amount.

Do you have to show collateral?

A business loan from Lendingkart will be an unsecured Business loan which does not put your valuable assets on risk. Such a business loan does not have a requirement of any collateral or security. You need not have to stress about developing your capital assets to meet the need of working capital. In fact the loan tenure of minimum one month and maximum 36 months offers a credit relief. Also, if your business faces any temporary problem, you can get the necessary extension for mitigating operational issues if the loan tenure is six months or more.

How often do you pay?

Moreover, business loans can be repaid monthly or bi-weekly. The EMI options allow you to stagger your installment as per your invoicing and sales cycle Depending on the sales you can choose to repay your business loan much faster with the bi-weekly EMI option.

Can you maintain a credit score?

An NBFC loan from Lendingkart is the best way to improve your business credit score as it reports loan accounts to all credit bureaus. Moreover, a business loan with Lendingkart is especially beneficial for companies witnessing a recent dip in credit score due to unforeseen market conditions.

What’s the big deal with the interest rate?

The online lenders have incorporated the latest technology such as big data and machine learning tools to determine the lowest interest rates on business loans. This means the best rate is arrived upon for business loans using technology depending on the case.

No matter you are in which stage of your business, platforms like Lendingkart are available to give wings to your dreams.

Small Business Loan Application Checklist

Business Loan Application Checklist

With easy accessibility of loans and various lending options, business owners are in a much better position today. But before you decide to take your business to the next level, make sure it is moving in the right direction and is set to achieve the intended targets. Earlier getting a loan sanctioned from bank would mean running from pillar to post for compiling documents, but today online loan for small business require minimum documentation. Even though loans are approved within 59 hours, you have to organize the documents before you apply for a SME business loan online.

An SME business loan is typically taken to fund expansion of business, purchase inventory, buy machinery and equipment, or funding working capital, etc. Finding the right SME business loan at a reasonable rate of interest may require a lot of research.  Always consider your financial capacity before quoting a business loan amount because if that is proved, you will stand a better edge and even avail a small business loan at competitive rates. Small business loans can be applied online on platforms such as Lendingkart at a reasonable rate of interest. There are a host of documents which will still be required if you apply for a loan online or offline. Firstly, you will have to complete the loan application form with correct information. You will also need to provide passport size photographs. Documents can vary from one lender to another depending on the type of loan.

To avail a small business loan, you will have to submit documents depending on whether your loan is secured and unsecured. For instance, a secured loan will require collateral which means you have to provide essential documents related to your asset which could be a property (residential or commercial), gold or shares. However, unsecured business loans will require some of the following documents stated below. A secured loan will also require the same documents along with the proof of assets.

Here we take you through the list of documents to be submitted along with the application form.

  • Identity proof: You will have to provide identity proofs which can be in the form of a passport, photo pan card, voter’s identity card, driving license, etc.
  • Residential proof: This is another critical requirement of a loan. You should be able to provide a proof of residence in the form of a ration card/telephone bill/ lease agreement/ electricity bill/ passport/trade license /sales tax certificate.
  • Proof of age: You need to have an age proof and this can be supported by passport, photo pan card or voter’s identity card.
  • Financial documents: You have to get copies of IT returns for the last two years along with the latest bank statements for six months and profit and loss and balance sheet for the last two years. The P&L also needs to be audited by a chartered accountant.
  • Track your credit score: Being aware of your credit score before applying for a loan is important. Lenders take note of your credit scores to check your capability of paying off the loan amount.  A good score increases the chances of your loan approval.
  • Get your documents in order: It is always advised to organize all the documents when you apply for the loan. Some of the above documents such as ID proofs, balance sheets, address proofs, cash flow statements, business documents and permits, and income statements are mandatory for a business loan. These documents give credibility to the lender about the borrower’s ability to service the loan on time.

Though banks require a host of documents to be submitted with a business loan application, the entire loan approval process has been made easier through online processing. You can further ensure that loan processing remains smooth by compiling documents in advance. This allows the lenders to verify and process your loan at the earliest.

If you have been considering an easy business loan, then make sure you meet all the requirements including documentation. It is always good to maintain recent copies of KYC, ITRs, bank statements and other documents required for SME business loans.

There are times when you start fretting over documents and qualifications for a loan at the last minute to raise money. If you have organized documents in advance, then that can help you save precious time and opportunities arising out of your business.  Hence, keep a note of the most commonly required documentation for loans mentioned above and read your offer documents carefully before you sign off.

Small Business Trends to watch out in 2019

India’s GDP growth at 6.6% bears a testimony to its development which thrives on the growth of small businesses among other factors. Let us crunch more numbers on the growing economic powerhouse: At 6.6% India grew faster than China’s 6.4% GDP growth in the third quarter. As the fastest growing economy in the world, India accounts for about 15% of global growth. MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities. The sector’s contribution to the country’s GDP is expected to increase to 22% in 2020. With SMEs playing such a critical role it is imperative to identify key drivers that can help the sector grow in leaps and bounds. Here are the latest Small business trends that will set the course of its future.

1)      Fintech companies to pave way for easier loans:

It is a well-known fact that the primary barrier for SME growth has been finance. Most businesses face extreme difficulties in getting access to working capital loans. Their problems range from inability to provide collateral, lack of comprehensive credit score and a challenging application process for approval of loan. Some of the lending platforms offer up to Rs 1 crore loan at a reasonable interest rates within three days and, that too, without collateral.  The new age online lenders are using AI-driven algorithms to generate a credit score for applicants to make the process of disbursing SME loans in India faster. There is a surge in non-banking finance companies offering customized quick small business loans solutions on online platforms. Going forward digital start-ups and alternate lending platforms will become an effective platform to solve the problems of SME business loans.

2)      SMAC technologies to find resonance with SMEs:

In a digital landscape when businesses are adapting technologies, SMEs cannot afford to remain behind. SMAC which combines technologies like social, mobile, analytics and cloud will be the most sought after solutions and emerge as small business trends 2019. It will aid businesses to sell products and services in an engaging, personalized and comprehensive manner, and that, too within affordable cost structure. The technology helps to create a level playing field for SMEs and enables them to compete with larger players as well.

3)      P2P lending to pick up:

With businesses crossing borders, the needs of SME business loans have expanded significantly. Today peer-to-peer lending has gained momentum as it eliminates the traditional approach of raising SME loans in India which is tedious, cumbersome and take a longer time.  Under P2P model, a business owner can place the request which is viewed by lenders who then decide on the requirements.  Once a borrower’s profile is approved, a loan can be sanctioned in a few hours. Even the credit rating procedure and background check of a borrower is processed faster as compared to traditional banks leading to better disbursal of SME business loans.  With digital banking you can easily get quick business loan approvals on platforms such as Lendingkart. Such innovations in lending space would emerge as one of the key sme business trends in 2019.

4)      Payment companies to expand services:

Those businesses have a successful run which relies on efficient tracking payments mechanisms. A new set of tech savvy companies have emerged to make the process of collections for merchants easier. These companies operate in the cloud and simplify the transactions. The entire payment is made seamless for merchants who can share payment links with customers via email, SMS, or WhatsApp. Such companies also work in tandem with traditional payment methods like credit cards, NEFT/RTGS, wallets, net banking etc.

5)      Social media will remain a top priority:

Around 96 per cent of the SMBs use social media in their marketing strategy. Facebook has been the most preferred social media channel for expanding the reach of SMEs and the platform keeps introducing features and insights to help them connect with new customers from different cities, regions or countries. One of the major small business trends in 2019 will be to weave social media in their marketing strategy and explore areas such as live videos to connect with audiences.

6) Cloud continues to be the main stay:

SMEs adopting the cloud have witnessed clear benefits because the technology is advanced, affordable, and easy to use. Cloud can solve some of the biggest challenges including password management, CRM, and managing mailing lists. According to the latest study, SMEs witnessed a multiplier effect of 1.5 times in its productivity and profitability with multiplier effect of 3 times after shifting from low to medium cloud technology. In fact, data and advanced analytics solutions are being explored to increase efficiency and cut cost. Businesses are developing algorithms and investing in artificial intelligence (AI). AI and analytics will dominate the SME trends in 2019.

With advancements in technology, it is time SMEs notice these trends and adapt them to stay ahead of the pack.

Starting a New Business in India – Infographic

Starting a new business is not difficult. There are seven steps you will have to take in order to become a business owner.

Business Plan

First and foremost, you need to formulate your business plan. In order to do so you need to grab a pen and paper and write down a statement of purpose, a business description, classify and clarify roles, operating procedures and have a clear understanding of the finances which include loan applications and cash flow management.

Secondly, you need to choose where you establish your business location (Headquarters). Manufacturing businesses are usually located away from urban areas.

Financing

Research will form the backbone of your businesses success. You will have to find suitable financing options and establish your legal structure in order to move ahead with your business plan. An institution like Lendingkart can help you secure a business loan and realize your business goals.

You will have to recognize opportunities such as government grants which can help you in your business finances. Define whether your business will be a single ownership firm or a partnership and then manage your finances accordingly.

Business Name

Next, the name of your business is what your customers and vendors will use to remember you. You will have to choose a name that is apt towards the business you do and or the customers you wish to serve. Do not delay once the name is decided. It is best to legally register the name of the business at the earliest.

Business Tax

A clean business is the one that lasts for long. Paying your taxes and applying for income returns, will ensure that the government has a clear picture of your books and there won’t be any locking of funds by the authorities to check your accounts. To avoid any untoward event, register your business with a PAN ID and tax registration number. Always report your business income, expenses and investments truthfully to enjoy a good business.

Business Licensing

You will also need licenses and permits to run your business which you should be able to secure from your local municipal corporation.

Once you have taken care of all the necessary paperwork, you will literally see your business take shape and hence you will soon need employees to grow your company to the size you want it to be. When you reach this stage, make sure you keep your employee responsibilities clear, concise and transparent.

This will promote a healthy work environment and thus attract more people to join you in accomplishing your dream of taking your business to new heights.

Copyright © 2019: This infographic is a part of Lendingkart.com

 

The Role of Textile Sector and How to get loan for textile business

Did you know? India has one of the oldest textile industries in the world. Throughout the course of world history, Indian textiles have remained a fascination in the middle-eastern and western societies. Today, textiles exports contribute almost 11 per cent to the total export by the country and the textiles industry provides employment for millions. Approximately, there are 40 million workers in the textiles industry and another 60 million who are indirectly associated with it.

The textile industry in India has a couple of broad segments. The first is the unorganized segment which includes handloom, handicraft and sericulture. These are operated at smaller levels and often manufactured through traditional tools and methods. Then there is the larger organized segment which includes spinning, apparel and garments manufacturing for local and international clients. Manufacturing in this segment is based on the use of modern machinery and techniques like the economies of scale.

In terms of market size, the Indian textiles industry is worth USD 108 billion, which is expected to reach USD 223 billion by 2021. Apart from providing employment to an estimated 100 million people, the industry contributes almost 5 per cent to the country’s Gross Domestic Product and 14 per cent to the Index of Industrial Production. Currently, the industry is witnessing a growth in investment and market activity. The industry has attracted Foreign Direct Investments to the tune of USD 1.85 billion between April 2000 and March 2016. The Government of India has also come up with several export promotion policies for the industry, allowing up to 100 percent FDI in the sector under the automatic rule. Also, there are plans to set up India’s first integrated textiles city in the state of Andhra Pradesh.

The path ahead for the Indian Small and Medium Enterprises in the Textiles Industry

The future looks bright for the Indian textile industry both for the large-scale and the SME section. There is a marked increase in domestic consumption and export demand also looks strong. As consumerism and disposable income of the middle-class continue to rise, more new international players are expected to enter the market. For example, Marks & Spencer, Guess, and Next have come to India within the last decade. India’s organized apparel segment is expected to grow at a Compound Annual Growth Rate of over 13 percent over a 10-year period. The SME segment, that deals mainly in handloom, handicraft and sericulture, is also benefiting from e-commerce. Several online platforms have come up in the last few years which are promoting the domestic textiles and have helped in expanding their customer reach in India and abroad.

Getting a loan for textile business

If you are a small business owner in the textile industry, you can benefit from a slew of government initiatives, such as:

  • The tie-up between the Department of Handlooms and Textiles has and nine e-commerce players and 70 retailers for increasing the reach of handlooms products. It will generate better prices and continuous business for SMEs in the textiles sector, and facilitate direct access to markets and consumers for small weavers.
  • In addition to the 5 percent interest reimbursement provided for specified technical textile machinery, the Revised Restructured Technology Upgradation Fund Scheme (RRTUFS) now covers manufacturing of major machinery for technical textiles for 5 percent interest reimbursement and 10 percent capital subsidy.
  • The Scheme for Integrated Textile Parks (SITP) provides aid to the extent of 40 percent (with a limit up to ₹ 40 crores) for the creation of infrastructure in the parks.
  • The major machinery for production of technical textiles gets a concessional customs duty of 5 percent.
  • Specified technical textile products are covered under the Focus Product Scheme. The export of these products is entitled to a duty credit scrip equivalent to 2 percent of freight on board (FOB) value.

Apart from these benefits, you can always apply for a small business loan for textile business if you need financial assistance. Nowadays, non-banking financial institutions like Lendingkart Finance are offering instant business loans to the tune of ₹ 2 crores for promising small and medium businesses. As opposed to bank loans, these RBI approved small business loans are faster and easier to obtain. Salient features of these small business loans for textile businesses include,

Features of these small business loans for textile businesses

  • Ticket size of ₹ 50,000 to ₹ 2 crores.
  • Quick turnaround time which can be as low as 3 days.
  • Online application, approval, and tracking.
  • Customized interest rates to match your credit profile.
  • Flexible repayments through monthly or bi-weekly installments.
  • Repayment period of 1 to 24 months.
  • Processing fee of 1 to 2 per cent with no other charges.
  • Zero-prepayment charges.
  • Loan renewal for the same amount upon full repayment.

As you can see, the ticket size and repayment window make these loans ideal for various business activities such as equipment purchase, restocking inventory, working capital management and business expansion. You can use a Lendingkart small business loan to perform any or all of the critical business tasks which require immediate financial attention. The loan application process is quite straightforward and takes only 15 minutes to complete. Simply log in at www.lendingkart.com or download the Lendingkart Finance app on your Android device to get started.

Startup Business Loan

A new business generally requires some form of business finance to take off from the ground. With the opening up of markets since 1991, the financial services market in India has seen exponential growth in terms of products and services. Nowadays, there are many ways a small business owner can raise capital for his/her enterprise. In today’s post, we are going to review nine such financial vehicles that allow a startup to raise quick business loans.

Startup Business Loan – 9 Best Resources for Startup Loan in India

1. A line of Credit:

The line of credit is a facility offered by your banking or financial partner, allowing you to withdraw funds as needed up to a limit. So, instead of receiving the full amount as a one-time term loan, you get the funds on a need-to-use basis. One benefit of this mode of startup finance is that the interest is charged only on the balance currently borrowed by you. The line of credit is usually used for short-term working capital to help improve the cash-flow or finance unexpected expenses.

2. Small Business Credit Cards:

Business credit cards can be a very cost-effective way to finance your startup business as many of these products come with zero per cent APR introductory periods, cashback and rewards programs. These cards can be used for covering immediate expenses while you wait for payments from customers and sometimes help in preserving cash for working capital or other requirements. However, small business credit cards are not ideal for funding large capital investments due to the very short-term nature of the loan and high-interest rates.

3. Peer-to-peer Lending:

Online P2P platforms connect you directly to individuals and institutions looking for investment. These business loans are generally known as P2P finance and help you reach lots of debt/income investors. The platform charges a processing fee and interest rates on P2P finance can go up to 26% because of the risk involved for the lenders. A good credit score is also a pre-requisite to borrow from a P2P lending site.

4. Equipment Financing:

You can use equipment financing to purchase equipment, machinery or vehicles for business use. Equipment finance is available through dealerships, banks and online equipment finance providers. Typically, the business loan is given by keeping the purchased equipment, machinery or vehicles as collateral and a processing fee is also charged. The main benefit of equipment finance is that you get the ownership of a valuable asset, the payments for which are spread over a period of time (generally one to five years). Equipment finance is a good choice for startup businesses which rely on equipment or machinery.

5. Small Business Loans for Startups:

Short-term small business loans are one of the best ways to finance your startup business. These loans are offered by banks and other RBI governed financial service providers. Small business loans from non-banking financial companies like Lendingkart come with features that are optimized for modern enterprises. For example, Lendingkart’s small business loans have a ticket size of ₹ 50,000 to ₹ 2 crores, which can be repaid in monthly or biweekly instalments of up to 24 months. Moreover, these loans come with lower interest rates and zero prepayment penalties. Lendingkart also offers a quick turnaround time for approving and disbursing your small business loan when compared to the time and hassle you face in applying for a business loan with a bank. You can get the money in your bank within 3 days of application if all your information and documents are in order.

The benefit of a small business loan of up to ₹ 2 crores is that it can be utilized for several things simultaneously, such as inventory or equipment purchase, streamlining your working capital and paying off immediate debts. A startup which has been in business for more than 6 months can apply for a small business loan with Lendingkart Finance.

6. Micro Loans:

These loans are generally given to very small business startups who have a less than ideal credit rating and no assets to collateralize. In India, these loans are offered by government programs like the Mudra Yojna. However, the loan value is often less than ₹ 50,000 which makes these loans not very useful for enterprising individuals. A plus point of microloans is that they are given at lower interest rates and are unsecured.

7. Crowdfunding:

Online crowdfunding platforms allow you to raise small amounts of money from a large number of people. However, there is a difference between P2P platforms and crowdfunding platforms. In crowdfunding finance, you are not required to pay back the money you get. It is a kind of donation towards your entrepreneurial cause by people interested in your idea. But sometimes, crowdfunding terms may include a provision for equity share if the startup becomes successful. The crowdfunding platforms usually charge a one-time percentage-based fee from the capital you raise.

8. Angel Investors:

Wealthy individuals who invest in your business in exchange for an ownership stake are often called Angel Investors due to the debt-free nature of the finance. However, money raised from Angel Investors is often less than the money you can raise through venture capital. On the plus side, Angel Investors are less likely to interfere with your role in the organization.

9. Venture Capital:

Venture capitalists are a group of rich individuals/investors who operate as firm. VCs, give you debt-free finance in exchange for a percentage of equity in the enterprise. However, VCs are more hands-on in their approach and often induce an organizational change in your business to retrieve their investment. Also, funding by venture capitalists is given in several rounds, such as a seed round (generally known as Series A), and subsequent payments upon achievement of growth targets.

So, this concludes our list of financial vehicles you can tap into for getting a startup loan or investment. Our recommendation is in favour of small business loans from NBFCs because of the versatility and flexibility of this particular financial product. And, the unsecured nature of these business loans makes the deal even sweeter for small businesses and startups who lack assets for collateralization.

To know more about small business loans for startups, visit us at www.lendingkart.com.