How a Business can Perfect the Art of Getting Investment? We Drop 7 Tips

Have you noticed that some businesses simply hit the nail on its head when it comes to attracting capital funding? They seem to be operating on the perfect game plan, with great products, impressive numbers and promising profit margins. So, how do they do it? Well, in today’s post, we are sharing a list of tips compiled by our market experts to help you join the league of entrepreneurs, who have made it big.

Networking is the Key:

For any business to stand out in an organic fashion, you need networking. Meeting with the local bigwigs and mixing up with the local startup community is a great place to start. Once you become recognisable within a crowd, it is time to hone the art of organic soft-selling. Never push your way through, rely on your social capital to do the work while pitching your ideas.

Always have Results with You:

The second thing you need is results as a proof of success. Results can be either in form of customers or in profits. But if you are just starting up, it is less likely that you will have a profit sheet to share, so, rely on real, paying customers to impress potential investors. Here, focusing on getting customers who will not require huge outside investment should be your priority. Never seek investments first and customers second.

Do not Make Cold Calls:

Cold calling investors and asking for their money is never a good idea. Once again, rely on your networking and arrange meetings, asking for advice or discussing a particular problem point. Asking for genuine help is the best way to have someone interested in your project and may eventually attract more investment than you can ever get from a cold call.

Show them the Money:

Investing in your company is ultimately a means to an end for the investor. So, instead of just showing them the vision, also prepare a pitch for return on their investment. Show them how they are going to earn back their capital and more by investing in your enterprise. If you can include a timeline in the pitch, all the better for you.

Get On-board a Start-up Accelerator:

Startup accelerators provide mentorship opportunities that can help a new business with organisational structuring, operational management and more. While joining a startup accelerator is not a guarantee of getting investment, it is another platform where your enterprise can gain crucial exposure and visibility.

Do follow ups:

It may seem like a chore once you have been told to revise your numbers or strategy by an investor, but if you do commit to it, make sure that you follow up. Fundraising is not a quick process, the investors vet your credibility before putting their money in your business. So, provide proof of your seriousness to make sure that the deal you are offering makes sense to them. If you say you are going to do something and go ahead and do it, everyone will want to work with you.

Take Advantage of Online Credit Market:

Nowadays, a lot of startups are getting help from FinTech lenders. These non-banking financial companies offer small-ticket finance for small and medium business owners all over India. A business loan can help you streamline your finances and keep a ready stock of inventory to acquire more customers in a short span of time. Moreover, a business loan will also improve your company’s credit rating and thus, your market standing. All these are numbers which impress and attract investors.

FinTech companies also offer quick business loans that do not require a ton of paperwork or financial history, which can be ideal way to finance your budding enterprise and make it ripe for picking by Angel Investors. For example, you can get a business loan of up to ₹ 1 crore from Lendingkart at competitive interest rates and flexible EMIs for up to 1-year duration. Lendingkart also offers auto-renewal of business loans upon full-repayment, which can act as source of funding in itself if you plan to expand gradually.

Concluding Thoughts

Great products and services may not always sell because money is needed to bring them into mainstream. Investment helps in establishing the tertiary systems that make up a successful organisation. Too many people with great ideas fail to achieve deserved success because of trying too hard to reinvent the wheel, so do not follow the crowd when seeking investment. Focus on your product, your customers and your network, and the bigshot investment will come to you. In the meanwhile, keep stacking up those numbers with business finance.

How Imports and Exports Have Changed in India After GST

Foreign trade is one of the major factors that determine a country’s economic growth. Exim policies are often a matter of priority for new governments as they try to recalibrate the political and economic narratives. Today, India is the fastest growing major economy in the world with a popular government, that is generally perceived as business-friendly, at the centre. Financial year 2016-17 saw a 4.7% jump in total exports by Indian companies. However, at the same time India also has a trade deficit of $105.7 billion, which means the imports still exceed its exports. Hence, the rollout of Goods and Services Tax in 2017 created anxiety and apprehension among business analysts who are already concerned with the rising import bill.

Under the previous system, imported goods were subject to import duties such as custom duty, countervailing duty, and special additional duty. The latter two duties are comparable to excise duty and value added tax respectively. On the other hand, imported services were subject to service tax.

Under the new system, the Integrated Goods and Services Tax (IGST) replaces all indirect taxes levied on imported goods and services. But there are certain exceptions to the rules as well. For example, petroleum products and pan masala imports are still liable to countervailing duties. Moreover, customs duty, education cess and other protective taxes are still being levied on certain goods. Imported services, however, only attract IGST now.

What is IGST?

Under GST, imports are treated as inter-state supply. So, as GST is a destination-based tax, the IGST is levied at state level, i.e. where the goods are being consumed or services being utilized.

Companies can pay IGST by using input tax credits of both Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST), along with input tax credits received for IGST itself.

What is input tax credit under GST?

Input tax credit (ITC) is the tax paid by a business when purchasing inventory or raw materials. ITC can be used by companies to reduce their tax burden by claiming relief up to the value of GST paid on purchases.

Import of services under GST

GST provisions put services under IGST when,

  • The supplier of a service is located outside Indian territory.
  • The receiver of service is located within Indian territory.
  • The place of supply of service is located in India.
  • The supplier and recipient are not merely the establishments of a distinct person.

Imports of services on or after 1st July 2017 are chargeable under IGST even if the actual transaction was dated earlier than the date GST came into effect. Also, if a partial payment of applicable taxes has been made under the previous system, the rest of the tax has to be paid under the GST law.

Filing Tax Returns

GST requires monthly tax filings as opposed to the previous system where importers filed returns under State Taxation Laws for import of goods and under Central Taxation Laws for claiming countervailing duties. Now, while filing monthly GST returns, importers have to declare the imported goods in Table-5 and imported services in Table-6, respectively, of the GSTR-2 form.

Exemption

Transportation of goods by aircraft and inbound shipments were not liable to service tax under the previous system. However, under GST, such goods are no longer excluded from taxation.

Impact of GST on Export

Exports are considered ‘zero-rated supplies’ under GST. In case of Zero-rated supplies, the entire supply chain is tax-free. So, no tax is levied on input tax side or the output side. If GST is paid for exports from India at any point in the supply chain, the trader can either export without paying IGST or can pay the IGST and claim refund later.

We hope this article helped you in better understanding the provisions for import and export of goods and services under the ‘one nation, one tax’ i.e. GST. At Lendingkart Finance, we are always looking for ways to create value for our customers and blog readers. Our financial products and services are especially designed for Small and Medium Enterprises looking for quick finance in form of business loans and working capital loans. Create a Lendingkart account now for a free loan assessment. We offer small business loans up to ₹ 1 crore for a period of 1 to 12 months, to help you expand nationally and internationally.

MSME Loans Within 59 Minutes: is it really possible?

The government announced a new scheme for small and medium business owners as a festive gift, ‘business loans within 59 minutes. The announcement had the business world buzzing with excitement as the scheme promises business loans up to `1 Crore. However, little else was clear about the due process to be followed for getting these quick business loans. In this post, we analyze the feasibility of the latest scheme and the hurdles one might face during the loan approval process. Furthermore, we will also have a look at other government initiatives for funding MSMEs and startups, and compare their performance to NBFC loans in India.

Details of the ‘59 Minutes Loan’

The loan being offered under the government scheme is mainly a working capital loan of ₹ 10 lakh up to 1 Crore. The minimum business loan rate of interest offered is 8% but it may vary based on the applicant’s credit score, business activities and other factors that determine the financial health of an MSME. There are no collateral requirements for this loan, hence making it an unsecured business loan – similar to the working capital loans offered by NBFCs like Lendingkart. Processing fees and charges are pegged at ₹ 1000 plus applicable taxes for borrowers who are accepted for lending.

Now, coming to the main highlight of the ‘59 Minutes Loan’ scheme. Participating banks offering products under the scheme are required to provide approval in principle to the borrowers whose proposal matches their product. While this approval will be given within 59 minutes, the actual disbursal of the loan will still take 7-8 working days.

Documentation required for the ‘59 Minutes Loan’

  • Last 6-month bank statement in PDF format for all business-related accounts.
  • e-KYC paper i.e. a digital version of know your customer paper.
  • Income tax returns for the last 3 years in XML format including income tax codes and e-filing details.
  • GST certification is necessary and the borrower has to provide his / her GST ID and password.
  • Ownership certificates / details of current ventures of the applicant.
  • Personal and educational details of the applicant.

The application process for ‘59 Minutes Loan’

The application starts with a ‘new user’ registration on the official website, www.psbloansin59minutes.com.

  • Step 1: Complete the sign-up process by entering your name, email and mobile number. Click on ‘get OTP’ to verify your credentials.
  • Step 2: Enter the OTP received on your phone and agree to the terms and conditions before clicking on ‘Proceed’.
  • Step 3: The next screen will ask a few basic questions which you need to answer in ‘yes’ or ‘no’ by selecting the corresponding radio selection box. Click proceed again to continue to the next step.
  • Step 4: Now, you will be asked to input your GST details, such as GST number and password, followed by income tax information. Here, you can either upload the statements in XML format or login with your ITR details such as PAN and date of incorporation.
  • Step 5: This step involves the upload of your past 6-month bank statements in PDF format. You can also login with your net banking credentials and allow the lenders to access the financial statements.
  • Step 6: Here, you provide the details of directors, proprietor and company address.
  • Step 7: Now select the purpose of your loan and provide the details of any previous / existing loans taken by your business.
  • Step 8: Select the bank through which you want your loan to be processed. The interest amount may vary from bank to bank.
  • Step 9: Pay the ₹ 1000 convenience fee, plus taxes for approval.
  • Step 10: Download your approval letter, pending further due diligence by the loan providing bank.

Potential pitfalls to be faced by the ‘59 Minutes Loan’ scheme

The thing to note here is that the ‘59 Minute Loan’ scheme is not the first initiative by the current government to ease business finance. A similar fast track business loan scheme called the Pradhan Mantri Mudra Yojna (PMMY) is already in place. The PMMY is also backed by the public sector banks and offers loans up to ₹ 10 lakh to MSMEs and startups. However, a closer analysis of the scheme reveals some major bottlenecks and drawbacks of government run financial schemes for small businesses in India.

For example, since the Mudra program was started in 2015-2016, a whopping ₹ 4.68 lakh crore have been disbursed to 9.9 crore loan applicants. While the sum of loans given is impressive, simple math tells us that the average amount per application is just ₹ 47,249. So, the question that needs asking is, can anyone setup a successful enterprise with less than ₹ 50,000?

While someone may be able to setup a shop or similar retail business for that amount, keeping it up and running is not possible without some minimum working capital expenditure. Thus, the amount of money offered under the Mudra program is not sufficient for startups and MSME funding at all.

Moreover, the CBI is already investigating a senior Punjab National Bank Official for fraud after his PNB branch approved ₹ 62 lakh in lieu of 26 loan applications under the Mudra program. The charges as quoted in the CBI complaint are “without conducting meaningful pre-inspection or physical verification of spot of business or residence and without ascertaining end use of the loan amount or creation of assets from the loan amount”.

Now, isn’t that the Mudra program? The PMMY was meant for offering quick business loans without collateral requirements and stringent check and balances. Which in turn makes the ‘59 Minutes Loan’ scheme susceptible to unforeseen hindrances. Since the new scheme offers unsecured business loans up to ₹ 1 crore, bank officials are going to be even more cautious in scrutinizing loan applications. Also, similar to the Mudra scheme which was a refinancing scheme, for which the funds were provided by banks, NBFCs and MFIs under pressure from the government, the new scheme also adds the burden of funding loans on public sector banks (PSBs). Thus, given the NPA crisis faced by almost all PSBs, the 7-8 days loan disbursal policy also seems a little far-fetched right now.

Comparing the ‘59 Minutes Loan’ scheme with NBFC loans

The concept of fast business loans is not a new one and the latest government scheme is just an extension of same-day loan approvals being given by NBFCs like Lendingkart, albeit with some sugar-coating. Some of the features being touted by the new loan scheme, such as online portal for loan application and digital submission and verification of documents, are already in use by NBFCs like Lendingkart. Moreover, the simplicity and steps involved in loan application process are also fewer for NBFC business loans.

Here are some of the key differences between the ‘59 Minutes Loan’ scheme and NBFC business loans.

  • Application Process: Both use online application process, needing users to register with name, email and phone numbers.
  • Documentation: The government’s business loan scheme requires the submission of 6-month bank statement, 3-year income tax filings, GST details (including your password) and incorporation certificates along with personal, educational and financial details of the owner / partners / directors. On the other hand, Lendingkart offers loans based on 6-month bank statements and 2-year ITR returns if your revenue is less than 60 lakhs. It is not mandatory to have net banking and Lendingkart does not ask for ITR and GST in case of Green Zone.
  • Loan Amount: The ‘59 Minutes Loan’ scheme offers loans from ₹ 10 lakh up to ₹ 1 crore whereas Lendingkart has a wider scope in terms of funding with business loans ranging between ₹ 50,000 to ₹ 1 crore.
  • Loan Disbursal: If all details check out, the government’s loan scheme offers business loans within 7-8 days, which is not a lot quicker than the existing loan products offered by banks. On the other hand, Lendingkart promises the disbursal of loan funds within 3-days’ time once your application is verified.
  • Additional Features: Both, the government’s MSME loan scheme and NBFC loans are unsecured business loans. However, Lendingkart offers several additional advantages such as top-up loan, renewal upon full repayment, zero evaluation charges and no pre-closure charges. Furthermore, Lendingkart also has a dedicated mobile app, customer support and social media presence to assist customers in real-time.
Particulars NBFC Loans 59 Minutes Loan Difference
Time for Approval Same Day Approvals Within 59 Minutes Same concept
Time for Disbursal Within 3 Days 8-10 Days NBFC loans are faster by almost a week
Loan Amount ₹ 50,000 to ₹ 1 Crore ₹ 10 Lakhs to ₹ 1 Crore NBFC loans have a wider window that increases the possibility of getting a business loan
Documentation Minimal Documentation Personal, Educational and Financial documentation required NBFC business loans are easier to get
Process FinTech process Bureaucratic process NBFCs use IoT technologies to minimise delays in loan disbursals
Funding Self-funded Available from selected public sector banks NBFCs have ready cash available for disbursals whereas PSBs are already burdened by an NPA crisis
Flexible EMIs Yes As per bank rules NBFC loans come with bi-weekly and monthly EMI options for faster and easier repayment
Prepayment Policy No Charges As per bank rules NBFC loans offer hassle-free early repayment in full
Auto-renewal Available Not available NBFC business loans offer better revolving credit facility than bank loans


Advantages of NBFC business loans

In its current form, the new scheme by government is a tough sell once you go beyond the face value. Here are some of the things which an NBFC business loan still does better than the ‘59 Minutes Loan’ scheme.

  • NBFC loans are self-funded whereas the government’s scheme relies on SIDBI and PSU banks – State Bank of India, Bank of Baroda, Punjab National Bank, Vijaya Bank and Indian Bank. Hence, the NBFC business loans retain the advantage of being fast and free from bureaucratic delays.
  • The starting value of ₹ 50,000 gives NBFC business loans another advantage as it increases the probability of getting a small business loan for an applicant who may not be able to service a loan worth ₹ 10 lakh, which is the minimum under the government’s proposal.
  • In essence, the 59 minutes loan approval time is similar to same day loan approvals, as the condition of ‘pending verification’ applies in both cases. However, where NBFC business loans from Lendingkart are disbursed within 3 days of verification, the same process takes 7-8 working days under the government scheme.
  • NBFC loans offer the facility of revolving capital through products like business loan renewal and zero pre-payment charges, making them more suited for working capital finance. On the other hand, fresh loans under the government scheme will have to follow the same application, approval, processing and disbursal cycle all over again.
  • NBFCs like Lendingkart also offer monthly and bi-weekly EMIs to help businesses with extended invoicing cycles. This flexible EMI feature may not be a part of the government’s MSME finance scheme from the onset.
  • The questionable success of previous government financing schemes also puts NBFC loans in perspective, where companies like Lendingkart Finance are now offering business loans across India.

Concluding thoughts

While we should laud the government’s efforts to make India more business-friendly, only time and numbers will tell the real story here. The political detractors of the government were quick to point out that the new MSME finance scheme has all the trappings of a same-day approval loan and that it is merely a pre-poll sop. Even several bankers have questioned the feasibility of the ‘approval within 59 minutes’ approach as the public sector banks which are expected to shoulder the burden are still reeling from a bad loan crisis and the shadow effects of demonetization. The most concerning part of the scheme remain the actual turnaround time for the business loan. The disbursal time of 7-8 working days can easily stretch up to 8-12 days when you count weekend holidays and public holidays. So, in reality, getting a business loan from the bank will still remain a cumbersome task.

On the other hand, NBFCs are offering a wider range of loan options and complementary products and services like auto-renewals and zero penalty pre-closures, which are hard to ignore. Add to that the possibility of getting a business loan within 72 hours and the government’s proposal loses some of its sheen. So, when compared head on, NBFCs like Lendingkart are still offering better value to their customers until the time the government scheme matures.

So, in the end, answering the question ‘is it really possible to get a business loan within 59 minutes?’. Unfortunately, the answer is no. You can get a business loan approval within 59 minutes, but all it means is that the banks refinancing the government’s scheme will follow their usual application and verification process after that. The actual loan will only be given after the process is complete, which can take up to 12 days. You can, however, get a business loan within 3-days by signing-up on Lendingkart’s website or mobile app.

Things to Know When Making Your Wife a Guarantor for Your Business

Most small and medium businesses need to stabilize before they can make profits. This initial phase requires capital and may make or break a new business venture. That is why most startup owners look for funding or business loans to meet their immediate asset creation and working capital needs. Now, getting a business loan can be a harrowing experience if it is your first ever project. Indian banks are already reeling from a bad loan crisis and are particularly wary of lending to new SMEs. Plus, banks need a guarantor who will vouch for you in case of a loan default.

What is the role of a guarantor?

A guarantor is the surety provider for repaying a debt if or when the original borrower fails to repay the debt. He or she signs a document to that effect and hence the guarantor is contractually obliged to repay the debt of the principal borrower in the case of default.

According to a Supreme Court of India verdict, the guarantor becomes equally liable for repaying a debt when a loan goes bad. Therefore, if you have made your wife or a close relative your guarantor for a small business loan, chances are that they will be dragged into legal troubles if you fail to service the liability.

Furthermore, the loan contract also gives the lender the power to attach the property of a guarantor (in this case the wife) to recover the loan amount.

How to safeguard your wife’s assets in advance?

There are two scenarios in which a lender cannot attach the asset of your spouse in a loan default recovery case.

  1. Register your business as LLP: New businesses are run under several categories such as sole proprietorship, partnership, Limited Liability Partnership (LLP) or private limited. In case of LLPs, the assets of inactive partners cannot be attached in a loan recovery lawsuit.
  2. Set up a Parental Trust: Discretionary trusts set up at the time of a daughter’s marriage are also exempt from business loan recovery proceedings. Having one set up for your would-be wife can help minimize personal asset loss in case of a business failure.

Instances when a lender cannot hold your wife liable in case of a business loan default

  • If a woman has no direct or indirect role in her husband’s business, the Married Women’s Property Act prevents lenders from attaching her belongings in the case of loan recoveries.
  • If the husband and wife are joint holders of a disputed asset, the lender has to reimburse the wife’s portion upon liquidation of the asset.
  • If your wife is a director in the company but not the guarantor, her assets cannot be seized by the lender.

Avoiding the hassles of a business loan from banks

As you can see, there is a lot of hassle and risk involved in securing a business loan from a bank. The red tape, the bureaucratic process and finally the stringent terms dictating recoveries are simply not worth the trouble in this modern day and age. Switching to alternate means of business finance can save you all that trouble and facilitate fast business loans at the same time.

Non-banking financial companies, or NBFCs as they are popularly known, offer instant business loans without any collateral and have a flexible recovery process that allows you a chance to settle the dues. Here are some of the benefits of applying for a business loan with an NBFC.

  • Online application and processing allow faster business loan approvals.
  • Money is transferred directly into your bank account and instantly available for exploiting new business opportunities.
  • Minimal processing charges and lower interest rates reduce the payback burden on your books.
  • Break down your loan repayments in bi-weekly or monthly installments or repay early without a worry as there are no prepayment charges.
  • Reapply for a business loan and get the previously sanctioned loan amount instantly.

These benefits, not only allow you to get loans quicker but also help your business grow faster, which means you are better equipped to face a financial blowback. Moreover, the recovery process is also very business friendly as NBFCs allow you to restructure your loans in cases of market upheavals.

Concluding thoughts

When you are setting up a new business, it is always a wise thing to have a comprehensive look at the business scenarios that will benefit you and the scenarios in which things can go south. Making your wife a guarantor for your business loan liabilities is one of those things. While, initially, it may seem like a good choice if your wife has a business of her own or has significant personal wealth, you may soon realize your mistake if things do not work as planned on the business front. Thus, taking some prudent steps in advance will help you and your wife avoid simultaneous bankruptcy. Moreover, financing your business through a FinTech lender like Lendingkart may be a better alternative altogether. Non-banking financial companies offer business-friendly financial products and services, and are better suited for small and medium enterprises looking for business loans up to ₹ 1 crore.

Want to apply for a business loan with Lendingkart? Check your Eligibility.

Warning Signs That State Your Business Is in Big Trouble

Most of the times, businesses that go into insolvency are taken by surprise on the suddenness of the event. It happens because most small and medium businesses are focused on day-to-day operations and fail to realize that there is something wrong with the larger picture. So, when the hammer finally falls, everyone is surprised and of course devastated by the blow.

While all business owners face challenges at one stage or another in their career, there are some telltale signs that can alert you about big financial troubles. Recognizing these signs also allows them to take corrective actions in time to salvage the situation. In this post, we are sharing the six things that can be a warning that your business might be in trouble.

  1. Difficulties in raising a new business loan: One of the very first indicator of upcoming financial trouble is the failure to secure a loan or fresh round of financing. If your latest business loan application has taken way too long in processing and eventually gets denied, it is time for some introspection at your SME. Lenders have pretty stringent due diligence processes and may be able to see the problems which you might have overlooked. Sometimes a lender, such as a bank, may tell you that everything is fine and to apply for a business loan again after a while. This happens because the lender does not want to push away a potential customer in hopes that you may be able to sort out the business troubles and will then apply for a fresh loan. So, never take such verbal communication for granted as it is still not a firm commitment.
  2. Lack of investors or buyers for your company: If you have been trying to sell your business through equity or direct buyouts and fail to find potential buyers, again it is a sign of troubles in your financial and operational situation. Just like financing, potential buyers also have stringent due diligence and value a business based on parameters which may not match with your internal estimations. Furthermore, sometimes a business owner in search for a buyer ends up neglecting the running of the business in the short-term. Which can significantly damage the immediate prospects of a sale and also brings down the value of the business.
  3. Frequently missing major milestones: As mentioned earlier in the article, every business has its problems and hiccups at some point, but if problems have become a norm at your establishment, it is time for checks and balances. Taking a look at the last one or two years of operations and doing a fair analysis of where you should be versus where you are may help in identifying problems in sales, product development, supply chain, working capital finance, etc. Whatever it may be, you must come up with a steady plan to overcome the problem because investors, lenders and buyers are seldom interested in excuses.
  4. Discord at the top-tier of management: The C-suite as it is generally called, is the top rung of your establishment. It is here where all the planning and overseeing happens. Sometimes, discord amongst the C-suite employees or surprise departures may also be a sign of things not going well at the company. Someone might have figured out that all is not well and has simply abandoned the ship as it begins to sink. So, whenever you lose a high-ranking employee do not just get into hiring mode, look for the reasons behind the exit as well.
  5. Accounts payable are way above normal: Accounts payables are one of the best ways to determine your company’s financial and operational health. Your accounts payable let you know about the state of your cash flow. If they keep stacking up, it means you are not generating enough inflow to be able to pay-off the debts, which is never a good sign.
  6. Very short operational runway: Lastly, most companies overestimate the time that they have got to sort out things. If your operational runway has less than six months remaining, it is a huge red flag and might even be a point of no return for your business. Having six months of cash runway is the minimum you need to get things to work again, if the cash stock falls below that, it is time to weigh your options seriously.

Moving quickly to resolve a financial crisis

If your business displays any of these warning signs, moving as quickly as possible towards a backup strategy should become your focus. If the problems are in operations or supply chain, it is time to give your teams a rap on the knuckles. Streamline your operations by cutting down manufacturing, downsizing or hiring experts. If the problems are with financing and you are having trouble raising fresh finance from the banking system, perhaps it is time to look at the ways of alternate finance for small and medium businesses available in the market.

For example, FinTech lenders like Lendingkart Finance offer short-term business loans to help businesses in managing their working capital. By applying for a working capital loan for your business you will be able to free up the cash at bank for capital investment and restructuring of your enterprise. Hence, taking correctional measures and day-to-day operations can go on simultaneously. So, consider taking a business loan from non-banking financial companies if your regular lenders are showing reluctance. Non-banking financial companies like Lendingkart also offer several other benefits like lower interest rates, flexible EMIs, zero-prepayment charges, and instant loan renewals that will help you get back on your feet.

So, do not wait before it is too late, if your business is showing the signs of trouble, take corrective steps now.

Fintech Advances Are Creating New Opportunities For Micro-Businesses In India

Traditionally, small and micro-business owners face a lot of hurdles when trying to raise cash from banks and other public institutions of finance. The bureaucratic and risk averse mentality of these institutions makes borrowing money difficult for upcoming businesses even if they have their finances in order. In such cases, a small business owner usually ends up selling some assets or private property to fund business growth.

While a bank’s unwillingness to lend to a new and upcoming business is understandable in these times of financial turmoil and growing NPAs, it does hurt small businesses with potential for growth. The situation, however, has improved markedly in the last decade as non-banking financial companies have emerged as a source of alternative finance for small and medium enterprises. Nowadays, micro-businesses are also benefitting from short term, small ticket finance offered by these companies.

Also known as FinTech, the NBFCs use a mix of financial products and IoT technologies to speed up the process of business loan approvals. FinTech solutions today are benefitting a growing number of small business owners, startups and freelancers in India and the world. Here are the things that make FinTech finance a veritable alternative to getting small business loans from a bank.

Diversified Products and Services

Where banks generally have a limited number of products and services and operate on the principle of ‘one size fits all’, FinTech lenders are doing things a little differently. They are not only offering money that you can use to expand your business but also provide business consulting, foreign exchange services and have different types of business loans and services to best match your needs. Unlike traditional banks, the products and services of FinTech lenders do not focus on large corporations and rather are meant for SMEs.

FinTech products like small ticket working capital loans are helping small business owners fill the gaps in their cash inflow and outflow. This has helped small business owners in taking advantage of sudden business opportunities that come their way. A report from the World Economic Forum has lauded FinTech as the enablers of global business environment for small businesses in developing economies like India.

Unsecured Small Business Loans

FinTech lenders are the first to realize that most small business owners are unable to get loans because of the collateral requirements of traditional lenders. A person who has just started a new venture is unlikely to have high-value assets to secure a business loan, which in turn limits his ability for growth. Also, spoiled by lending to larger companies, banks often do not see any benefit in small-ticket loans and categorically deny loan applications which do not meet their policy parameters. Here, FinTech lenders have come up with the concept of small ticket, short-term unsecured business loans.

Now, small business owners can get short term business loans as per their own requirements instead of borrowing according to the lender’s perspective. For example, if a bank’s policy is to only approve business loans above Rs 5 Lakh, a small business owner with a requirement of just Rs 3 Lakh may also end up applying for a loan of Rs 5 Lakh. Which then he will have trouble repaying due to high EMIs. On the other hand, FinTech finance providers like Lendingkart are offering business loans starting from Rs 50,000 up to Rs 1 Crore for eligible loan accounts. Hence, providing flexibility and need-based financial services desired by small business owners.

Easy and Flexible Repayments

Loan amounts are not the only thing flexible about FinTech finance. Borrowing from an NBFC also gives business owners the freedom to choose their preferred EMI schedule or prepay the loan without hefty penalties. This makes renewing loan cycles easier and makes FinTech credit a type of revolving finance for working capital needs and capital expansion. On the other hand, banks usually have a fixed repayment cycle that disregards invoicing and sales cycle of a small business.

Once again, a small business is better off borrowing from FinTech lenders like Lendingkart Finance who offer bi-weekly and monthly EMI schedules. Moreover, Lendingkart completely waives off prepayment charges if you decide to settle your loan in full.

Re-borrow the Money

The advantage of FinTech finance does not end at the repayment of an existing loan. A business can re-apply for a business loan upon full payment of the existing loan and get an instant approval for the previously approved amount. This is one of the best ways to get small business loans time and again and not only helps your business growth but also contributes to a significant increase in your business credit score.

In Conclusion

There is no doubt that FinTech is one of the most transforming platforms for small business owners in the 21st century. By enabling quicker and easier credit, FinTech has provided much-warranted relief to SMEs from their age-old financing problems. FinTech has also helped cut down the informal credit market where private lenders are used to charging exorbitant interest rates (sometimes up to 36% to 48%) from unsuspecting borrowers, trapping them in vicious credit loops. The lower interest rate business loans and reasonable repayment time windows have helped many a small business owner in breaking out and earning their way to success.

Ultimately, FinTech has become an important pillar of nation building in India where 45% of the GDP contribution comes from small and medium business industries. Due to its digital nature, it is a very transparent medium of finance as well, which has helped small businesses join the mainstream and become tax compliant.

If you are looking for an Instant business loan or wish to know more about FinTech finance, visit us at www.lendingkart.com and have a look at our FAQs section. You can also contact us by dropping a mail at info@lendingkart.com. To apply for a business loan, simply check your eligibility and create a Lendingkart account to begin your loan application.

Here’s How to Secure Collateral-free Working Capital Loan up to ₹ 1 Crore

Small business loans are both hard and easy to get. If your business has a verifiable history and you adhere to the tax and policy guidelines laid by the government, then it is easy to secure a business loan. And if, your papers are out of order, then it is a little harder to get one. Still, small business owners who are careful in managing their income and expenditure, and regularly pay due tax, can also find it hard to secure institutional finance in the current economic environment.

The banking sector in India is facing an unprecedented rise in non-performing assets a.k.a. NPAs. This has put pressure on most public and private sector banks to lend prudently. While the additional measures of scrutiny are the need of the hour, they are definitely affecting the investment environment in the country. Also, since the Indian economy is the fastest growing major economy in the world at the moment, a lack of investment doesn’t bode well for small and medium enterprises which contribute over 45% to the GDP growth.

Fortunately, the alternate finance industry has taken the mantle for providing working capital finance for SMEs of India. Non-banking financial companies like Lendingkart Finance are leading traditional banks in terms of funding and nurturing SMEs. There are several benefits of FinTech finance as it is popularly known because of its reliance on Big Data and Internet of Things.

Faster Business Loans: FinTech companies like Lendingkart are offering small business loans with a minimum turnaround time of 72 hours. This has been made possible by switching to online application, documentation and verification of loan requirements. Since, the government has also emphasized digitization in its schemes and policies, it has become easier to verify most of the financial information online.

Unsecured Business Loans: NBFCs are not only offering business loans faster but are also offering them without any collateral i.e. putting an asset up as security for the loan amount. Thus, removing one of the biggest problems faced by small and medium enterprises when applying for a business loan.

Lower Interest Rates: By eliminating manual work hours in loan processing, NBFCs are saving more in terms of operational costs. The benefits of which are then passed on to the borrowers in form of lowered interest rates on small business loans. With a good credit score and healthy balance sheet you can secure a business loan at half the rate of private money lenders.

Flexible Monthly Installments: NBFC loans are also quite business friendly as they offer multiple repayment options in comparison to bank loans which have fixed EMI schedules. For example, Lendingkart Finance gives you an option to repay your business loan in bi-weekly or monthly installments. So, if you are confident of generating revenues faster, you can also repay your loan faster. Otherwise, you can opt for a more relaxed repayment plan.

Waiver of Fees and Charges: Another benefit of FinTech business loans being online is that you pay minimal processing charges. Lendingkart has a processing fee of just 2% to 4% (depending on sanctioned loan amount), which is several notches lower than that of a bank. Furthermore, NBFCs are also waving of prepayment charges / penalties if you decide to repay your loan early.

Renewable Business Loans: A huge benefit of taking a small business loan from an NBFC like Lendingkart is that you can easily renew your sanctioned loan amount upon repayment. So, it is a kind of revolving finance facility that you are getting for managing your working capital.

Credit Score Improvement: Last but not the least, NBFCs also report your transactions to the credit rating agencies, which in turn helps in raising your credit score. So, by getting a small ticket business loan from an NBFC, you are inadvertently opening the doors to larger financial investments for your SME.

Applying for a Business Loan with Lendingkart

Lendingkart is one of the leading business loan providers in India, offering short-term working capital finance up to ₹ 1 crore for SMEs. To get a business loan you simply need to follow the following steps.

Getting your Documents in Order: Before applying for a business loan with Lendingkart, make sure that you have the digital copies of following documents handy.

  • Business registration / incorporation certificate and Company PAN Card
  • Bank account statements of all business-related accounts for the past 1 year
  • Personal / partner / director identification such as Aadhar and PAN Card

Assessing your Loan Requirements: Another thing to keep in mind when applying for a business loan with Lendingkart is that you should do a realistic analysis of your financial needs. Applying for an overly ambitious loan amount may see your application rejected whereas under applying may not fulfill the purpose for which you are taking a business loan.

Improving your Credit Rating: This is a one-off step for companies with a less than ideal credit rating. We recommend that you take steps to improve your credit rating by repaying existing debt and streamlining your finances before applying for a business loan to get the maximum benefit in terms of loan amount sanction and interest rates.

Now that you are ready to apply for a business loan, head over to the Lendingkart website or download the Lendingkart app on your Android or iOS smartphone to create a free loan account. The process for application is fairly straightforward, fill in your business details, loan requirements and upload the aforementioned documents to get an instant business loan quote. The quoted loan amount can be equal to or slightly lower than the requirement you share with us. Choose to accept the loan offer and Lendingkart will start the verification process.

You can easily track your loan application status from your Lendingkart loan account online. If all things check out, Lendingkart will credit the funds to your business account within 3 days of application.

For securing a quick, collateral-free working capital loan from Lendingkart.

Top Factors that have an Effect on Your Business Loan Interest Rates

If you are a small and medium business owner, you would know what a chore it can be to secure a business loan. Apart from the general problem of securing business finance, SME owners also face exploitative interest rates, unfeasible loan repayment schedules, and high prepayment penalties. This in turn reduces their trust in institutional finance. However, in recent times, the business lending scene has seen a transformation owing to FinTech. It is a relatively new form of business finance which focuses on speed, efficiency, and ease of getting business loans. FinTech finance is offered by non-banking financial companies like Lendingkart and remains one of the fastest ways to get a business loan today.

But as things stand, most borrowers are still worried more by the interest rates on business loans rather than the associated problems in securing them from a traditional lender. While NBFCs like Lendingkart do offer lower interest rates on business loans, there is an internal and external component to determining interest rates which cannot be overlooked by any marketplace lender. In this post, we will have a look at the top factors that have an effect on your business loans interest rate and how you can tweak some them to lower the amount of interest you pay.

Internal factors that increase or decrease your business loan interest rates:

  1. Credit Score: The credit rating of your business is of utmost importance when it comes to determining business loan interest rates. If your credit rating is below the 700 mark, there is a high chance that your loan application will get rejected or you will be charged an exorbitant amount of interest. Improving your credit score by repaying existing debts and streamlining your cash flow will help you lower the interest rates on future loans in this case.
  2. Time in Business: The age of your business also matters when it comes to determining your loan interest rates. If you have a long-running enterprise, the lenders trust you in terms of stability and performance and are willing to take the risk of lending money on lower interest rates. That is one of the reasons why startups and new businesses without a minimum experience struggle to get institutional finance in India. However, NBFCs like Lendingkart have a very liberal ‘getting on your feet’ requirement and are willing to lend to stable business ventures as young as 6 months.
  3. Type of Business: Several industries and businesses are considered untouchable by financial lenders. These businesses are usually classified by government and financial policies as highly volatile and risky. Getting a business loan for such a venture often includes special permissions, higher interest rates and fulfilling specific conditions.
  4. Business Plan: A lender will often ask you to disclose your plan for growth before providing finance. So, in case you have a ‘make it as you go’ policy or the lender is not overly confident in your ability to execute a plan, you may still secure financing albeit at a higher rate of interest. On the other hand, preparing a healthy and feasible business plan before applying for a business loan can actually lower your interest rates.
  5. Revenue / Sales: Another major point on the checklist for getting a business loan with lower interest rate is having a healthy revenue stream, which in turn means having a good sales network. In case, your business is not earning in proportion to the amount of loan you are seeking, the application may get rejected or you are offered a modified loan amount or the interest rates are raised according to the risk of default. Again, this is an internal factor and you can take steps to get lower interest rate on a loan by optimizing your operations and income.

External factors that increase or decrease your business loan interest rates:

  1. Rate of Inflation: It is the rate at which the value of a currency reduces, which in turn has an effect of the general prices of goods and services. If the inflation rate is high, then things become costlier and the purchasing power of a consumer decreases. It has a domino effect on the rate of interest on business loans. A decrease in purchasing power means the interest rates on borrowings go up. So, it is important to take note of the prevailing economic conditions when applying for a business loan.
  2. Monetary Policy of RBI: The Reserve Bank of India uses the monetary policy to keep a check on the liquidity in the market. When the monetary policy is relaxed, the liquidity increases and there is more cash in the market and so the interest rates on loans go down. On the other hand, when the RBI tightens the monetary policy to check oversupply in the market, interest rates on business loans increase.
  3. Loan Demand and Supply: As with every commodity, the concept of demand and supply also applies to the loan products. When the demand for business loans in the market goes up, so does the interest rates and vice versa. So, if you are planning to apply for a business loan, do a check on loan demand and supply for your sector to get the best interest rates possible.
  4. Type of Loan: Interest rates on a business loan also depends on the type of loan you apply for. If you are getting a secured loan i.e. a loan that requires an asset as collateral, the interest rate is going to be lower as the lender already holds something of value to recover the money. On the other hand, if you apply for an unsecured business loan, the interest rate is going to be slightly higher. But you can also get an unsecured business loan with lower interest rates if you have optimized the internal factors that have an effect on your loan interest rates.

So, that’s that. Interest rates are one of the most important aspect of getting a business loan as lower interest rates help you in growth and higher interest rates may lead to a vicious debt cycle. Therefore, we advise that you analyze all internal and external factors that affect your business loan interest rates before applying for one. To know more about FinTech business loans, visit us at https://www.lendingkart.com/

Indian Government Reduces the Tax Burden on SMEs

Indian economy has stayed robust for the past few years. Global credit rating agencies continue to display confidence in the Indian economy and the government is also optimistic about meeting its fiscal targets. This in turn has prompted the government into taking on some bold reforms to the Indian economic system in the past. In yet another move, the government has announced through the Ministry of Finance that it is lowering the rate of deemed profits under the presumptive scheme for businesses.

This is good news for small and medium enterprises operating in manufacturing, wholesale, retail and trading. Earlier, when a business opted for the presumptive scheme of taxation under section 44AD, 8% of its total turnover or gross receipts was taken as net income chargeable under tax. However, the government has announced a new incentive for businesses wherein they can reduce this tax rate to 6%.

How you can reduce the tax on your business income under the new scheme?

Well, going digital and creating a low cash environment is one of the government’s primary economic objectives. The new scheme is an incentive for small and medium businesses who conduct their business transactions through electronic mediums. A statement by the finance minister also reflected this sentiment as he noted that small businesses can save up to 30% in taxes by availing this scheme and going cashless.

To take the benefit of the scheme the precondition for traders and businesses is that all their payments should be through digital means. Hence, the deemed profit rate shall be reduced from 8% to 6% for those who satisfy the pre-condition.

Who can benefit from the scheme?

SMEs which have already moved to digital transactions will benefit the most from this scheme. The tax rebates are being given with a retrospective effect. So, if your business has been accepting payments through digital transactions since 1st April 2016, you can claim tax benefits under the scheme up to 31st March 2017.

Consequently, if you have missed that opportunity, there is still a silver lining for your business, as you can benefit from the scheme by moving your future transactions through electronic modes. One caveat of the scheme is that all transactions done through cash are still liable for taxation at 8% under the deemed profit presumptive taxation scheme.

The following table shows how a business can save taxes under the new scheme.

Particulars

100% Digital 100% Cash 50% Cash, 50% Digital

Gross Turnover

₹ 1 Crore ₹ 1 Crore

₹ 1 Crore

Digital Turnover

₹ 1 Crore Nil

₹ 50 Lakhs

Cash Turnover Nil ₹ 1 Crore

₹ 50 Lakhs

Deemed Profit @6%

₹ 6 Lakhs NA

₹ 3 Lakhs

Deemed Profit @8%

NA ₹ 8 Lakhs

₹ 4 Lakhs

Total Profit

₹ 6 Lakhs ₹ 8 Lakhs

₹ 7 Lakhs

Deductions u/s 80C

₹ 1.5 Lakhs ₹ 1.5 Lakhs

₹ 1.5 Lakhs

Taxable Income

₹ 4.5 Lakhs ₹ 6.5 Lakhs

₹ 5.5 Lakhs

Tax Payable

₹ 15,452 ₹ 56,650

₹ 36,048

Tax Savings ₹ 41,198 Nil

₹ 20,596

So, by going the digital route, a small business owner can save as much as 72% in taxes through the new presumptive tax scheme. Such a margin can be a huge relief for small business owners and Kirana shop owners who operate at very thin profit margins. A legislative amendment in this regard was carried out through the Finance Bill, 2017.

Additional benefits of the scheme

Since this scheme is aimed at bringing more transparency to the organised and unorganised small and medium business sectors, there are several other financial benefits for SMEs as well.

Raising Capital through Investment will become easier for small business owners as the profit margins improve. An investor will be more willing to put his money in a business with healthy profit margins and support from the government of the day.

Getting Unsecured Business Loans through banks and NBFCs is also supposed to get easier for SME owners with an increase in their profits. However, here non-banking financial companies are positioned better than the banks. Traditional banks in India are simply too slow for the digital initiatives whereas NBFCs like Lendingkart Finance have already embraced digital finance, here’s how.

  • Lendingkart offers business loans online through their website and mobile app.
  • From application and document uploads to tracking, approvals and funds transfer, everything is done online.
  • An SME can get a business loan within 3 days’ time.
  • Digital financing allows Lendingkart to offer lower interest rates on business loans, reduce processing charges and waive off prepayment penalties.
  • Instant refinance available upon closing an existing loan.

Raising credit rating is another side benefit of the new scheme as more profits means less credit liabilities and subsequently a healthier balance sheet. This will raise a business’s credit score and help secure more financial resources for growth and expansion.

In conclusion

All in all, the new scheme is a very good incentive from the government and shows the ruling dispensation’s eagerness for market reforms. Small and medium business owners are set to gain from this scheme both in short-term and long-term. It would be good if the government can extend the benefits of these schemes to professionals taking the benefits of the presumptive tax scheme. However, one step at a time does the trick and we applaud the finance ministry’s proactive approach to business development in India. Moreover, the financial benefits of the scheme such as easy small business loans and growth in investment prospects are definitely positive steps for the economy and the people.

Five Key Challenges Faced by India’s Women Entrepreneurs

Every day, the age-old stereotypes of India’s patriarchal society are being broken by enterprising women artists, business leaders and political personalities. The newfound institutional and social support has enabled aspiring women to come out and challenge men in almost every field. The small and medium enterprise industry is no different and many such businesses, helmed by women entrepreneurs, are leading innovation and giving stiff competition to their industry counterparts.

However, India is still in early days of a social revolution that demands equal status for all genders. A women entrepreneur in India faces many challenges in starting and continuing her journey. In today’s post, we discuss the five key problems faced by business women in India.

Social Acceptance for Working Women

While India has become more open to working women in recent years, in most cases the acceptability still comes with a caveat. A working woman is expected to balance her time between household chores and her professional work in most families. This may not be a key challenge for educated young women in cities starting their own business but definitely pose a challenge for married women living in urban or semi-urban areas who discover their calling later in life.

Marketing and Promoting their Enterprise

Another key challenge faced by women entrepreneurs is marketing and promotion of their startup business or SME. The matter is further complicated by the fact that online marketing and promotion has taken center stage in recent years. Since, IT is a male dominated field, women entrepreneurs often face competitive disadvantage when hiring online promoters and agencies to market their business.

Problems in Resource Procurement

Be it leasing a space for running their business or making a deal for raw material supplies, most women entrepreneurs face heavy disadvantage and distrust when starting on their own. Once again, it’s the prevailing social bias and general misconceptions about work ethics of women that hinder their access to raw materials, labor and machinery. Therefore, in most cases, women entrepreneurs end up paying above the base rates for procuring operational resources and supply chain contracts.

Getting Funding for SMEs

A major challenge faced by women entrepreneurs is securing funding for their small business. Here the issue is two-fold. The traditional banking system is still run by India’s lumbering bureaucratic system which is slow, biased and male dominated. This makes it very hard for women entrepreneurs to secure funding from a bank as the ultimate power for approving a business loan rests with the bank officials. On the other hand, Angel investors and venture capitalists who fund startups and promising SMEs often balk at working with women CEDs and business owners. Even if they do agree to fund a small business run by a woman, they often try to take control of the company by creating proxy power centers in the company.

A Patriarchal Social Order

As a whole this article may seem like a rant about women entrepreneurs not getting their due recognition because of the men. Well, it is the truth of the day. The key challenge faced by women all over the world and especially in patriarchal societies like India is the dominance of men. Women entrepreneurs face a lot of gender-based discrimination and harassment while working their way to success and these are not limited to the points mentioned above. Therefore, the existence of a biased social order is, without doubt, the biggest challenge faced by working women.

Our Vision for Empowering Women Entrepreneurs

At Lendingkart Finance, we believe in equality and adhere to the ethos defined in the constitution of India. Ensuring safe working environment for women and empowering them is a part of our vision and mission. One of the main reasons why women in patriarchal societies lag behind men is due to the lack of financial freedom. Here, at Lendingkart, we try to rectify that with our unbiased financial support system for small businesses which relies on business performance rather than social bias for granting small business loans.

We have an online business loan application process which analyzes your business for performance and financial stability and gives instant loan quotes, regardless of your gender. To simplify matters further, we have kept the documentation requirements to bare minimum. Once again, document submission is also done online and our system allows you to track your loan application in real-time as we verify the information provided by you.

If you are a woman entrepreneur looking for quick business finance to meet your working capital requirements or business expansion, Lendingkart can offer you a small business loan within 3-days of application. Furthermore, our unsecured business loans come with lower interest rates than many of the traditional banks and lending institutions out there. We also offer flexible repayment options such as monthly or bi-weekly EMIs that allow you to repay your loans easily.

Lastly, a relationship with Lendingkart Finance also gives you the opportunity to connect and network with like-minded SMEs and startups to grow your small business.

Concluding Thoughts

The business scene is still a tough place for women in India, but despite its hardships, enterprising women continue to find new ways to beat the odds placed against them. For the most part it is their own will power and vision that makes it possible for them to overcome the social and professional challenges; and in a small part it is the help from a younger, more open and pragmatic social and business order.