What Experts are Saying About Taking Startup Business Loans?

Being an entrepreneur is more about creativity than financial pursuits. Successful enterprises are started with an innovative idea that grows to become a viable product or service. Such products or services can either be a means to fulfil the requirements of the day or a means to create an entirely new market. In both cases, creative ideas and continued innovation thrive whereas half-baked schemes are often unsuccessful.

However, it is also true that every great business idea needs funding to make it into reality. Every new entrepreneur faces the problem of business finance when giving shape to his/her first business idea. While self-funding can help sustain the startup for a short time, scaling it up to full potential requires additional funding.

To fund or not to fund? It is one of the crucial questions faced by an entrepreneur. If the business idea is viable then it would need funding for growth and if the initial launch has not drawn the expected response, either it needs strategic tuning or needs to be abandoned altogether. In both cases, the funding is most likely secured through a short-term debt, such as a small business loan, before the business can be pitched to investors for future funding.

In today’s post, we have summarized 3 tips by startup experts that can help you decide when you should apply for a small business loan for your startup business.

Tip 1: When your answer is ‘yes’ to these three questions

Honest determination of the following queries will help you determine the strength of your idea and its feasibility in the existing market conditions. If you can positively answer these three questions then you should definitely go ahead and apply for a startup business loan.

  • Do you have a unique business idea which addresses a genuine customer need or requirement?
  • Can your idea be achieved through current technology and marketed within the next 12 to 18 months?
  • Is your management team capable enough to make the idea into a reality?

If your answer to each and every question posed above is a definite ‘yes’ then perhaps it is time for you to start looking for business loans online.

Tip 2: When you have a runway for at least a couple of years of operation

No business, small or big, is built in a day. An enterprising mind needs to think ahead about the things that are to be achieved in the near term i.e. 2 to 3 years down the road. For that, you need a clear analysis of your finances and operational capacity and add the runway that will be provided by the small business loan to it. If your runway is exhausted before the minimum 2 years required, you need to re-analyze the targets or the finances, whichever suits your needs.

Taking a loan that is too small for actualizing your business plans will leave you stuck in the middle with a risk of losing everything that was planned. Similarly, a loan that is too large may leave you with a debt that your business and personal finance could not service.

Tip 3: You are absolutely sure of the market demand for your product or service

As discussed above, the initial phase of operations lets you know about the shortcomings of your product or services. This allows you to realign the enterprise to better suit the customers’ needs. This phase of trial and error takes some time but eventually helps you in making your product market-worthy.

So, it is recommended that the concern of funding should be raised only after this period is over and the product or service is ready to fill the demand in the market. Raising money too early will have you burning the cash on unnecessary expenses, hence increasing your initial losses, which can sometimes lead to a premature end of an enterprise.

Once you have found the business model that works, you can move ahead with raising funding through business finance.

Lendingkart Small Business Loans for Startups

Once you are done setting up the business, answering the three crucial questions, laying out the roadmap, and finalizing the business model, getting a business loan for startups become easier. Non-banking financial companies like Lendingkart have financial products and services designed for today’s fast business environment. For instance, you can get a business loan online within 3 days of application from Lendingkart Finance.

These unsecured business loans are offered for a period up to 2 years with a principal value of up to ₹ 2 crores. The loan interest rates are determined through proprietary business analytics which makes the whole process transparent and fast. Furthermore, a startup business can repay the loan in easy monthly instalments or repay the loan early through bi-weekly payments. Lendingkart also promises zero prepayment penalty if you decide to settle the debt early through a one-time payment after servicing the first EMI.

To be eligible for a startup business loan from Lendingkart, your enterprise needs to be operational for a minimum period of 6-months. To know more about our startup business loans and check out the complete eligibility criteria, visit us at www.lendingkart.com.

Which one is better, Crowdfunding or Small Business Loan?

The world of business finance has seen a rapid transformation in recent years. Today, there are as many as fifty financial products and services, catering to different sets and sub-sets of business loan seekers. These products have made it very difficult for a first-time loan seeker to pick and choose a financial vehicle that will enable growth for his/her enterprise. In today’s post, we are comparing two such financial products which offer funding to small businesses and startups i.e. crowdfunding and small business loans.

What is crowdfunding and how it works?

Crowd funding is a relatively new concept in the financial markets. In crowdfunding, a business venture gets funding through a series of small donations/pledges from multiple individuals/investors. In return, the business promises to deliver a niche product or equity share in the company. Crowdfunding is usually used by enterprising individuals to get money for their pet-projects. The money comes through crowdfunding platforms online, where people can list their idea or product which is under development. Interested individuals/investors donate the money using online payment options to fund the idea or project.

What are small business loans and how they work?

Business loans have remained an integral part of the banking system ever since its inception. However, the main focus of banks offering business loans has always been on large, commercial clients. As a result, small business owners had to rely on private money lenders and proxy financial help to get funding. The terms of these private business loans were quite exploitative to say the least. Enter non-banking financial companies, a new kind of financial institution that could offer RBI approved business loans to small and medium business owners.

The loans offered by NBFCs are customized for individual business needs and hence have terms that suit a small or medium enterprise’s financial capabilities. Hence, these loans are called small business loans.

Small business loans have a smaller ticket size and shorter repayment window than a traditional business loan. Generally, small business loans are also unsecured loans and hence are more attractive for SME owners who do not have substantial assets for collateral.

Crowdfunding vs. Small Business Loans

Factors Crowdfunding Small Business Loan
Financial Vehicle Provider An online platform where you can host your campaign for crowdfunding. An online platform, like Lendingkart, where you can apply for a small business loan.
Probability of Finance It totally depends on the idea/product that you are selling. If your idea/product appeals to the viewers you will be able to raise funds. But if there are not many takers for your proposition there will be little or no funding. If you have a decent credit rating and proper tax records, and provide all the necessary documentation, there is a high chance that your loan application will be approved.
Application Process Different crowdfunding platforms will have different terms and conditions for raising funds through their portal. Create an online account, get a loan quote based on your financial information, accept the quote and upload documents for final verification.
Credit Requirement & Fulfilment Since the amount of money, you receive, is totally dependent on the idea/product you promise to develop, the actual amount of money you will receive will also depend on the same. You receive the promised amount after deduction of a processing fee by the lender. The ticket size for Lendingkart’s small business loans starts at ₹ 50,000 and goes all the way up to ₹ 1 crore.
Interest & Other Charges Usually, the crowdfunding platform will charge a one-time percentage-based fee. Lendingkart calculates interest rates through business analytics, promising the best interest rates for small business loans for every loan application. The processing fee is 1-2% depending on the principal amount.
Repayment Terms There is no repayment involved in crowdfunding but you are required to fulfil the promises made in the campaign, such as developing the product or offering a share in the equity. Small business loan repayments can be done in flexible EMIs – monthly or bi-weekly – when you apply with Lendingkart. There is no prepayment penalty or charge as well.

Concluding Thoughts

As the success of a crowdfunding campaign depends entirely on the interest of individuals or investors, it is not a viable option of business finance for every SME borrower. A pro of the crowdfunding is that it allows you to gauge the market’s interest in your idea or product. But, that too requires a lot of upfront effort and may involve preliminary investment on your part. Thus, if the crowdfunding campaign fails, it becomes a loss of both time and money.

On the other hand, small business loans, especially from non-banking lending platforms like Lendingkart Finance, offer a much more reliable method of getting business finance for your budding enterprise. There are no cons as such to unsecured small business loans because they give you everything – from the required funding to lower interest rates and flexible repayment options – to make your business idea work.

To know more about Lendingkart’s small business loans in India,visit us at www.lendingkart.com.

How a Business Loan Can Keep Your Enterprise out of Trouble?

The biggest question to answer when you apply for a business loan is how that amount is going to be useful for your business. If you do not have a definitive answer to that particular questions, perhaps you should hold-off getting a business loan.

The way a business loan can help your business depends on what type of financing you are considering. It also depends on the type of your business and its overall financial health. To get more insights into the matter of business finance and its impact on your business, let us have a look at the type of business loans which are helpful for your business.

Term Loans

A term loan is the traditional loan which is acquired through a bank or a non-banking financial company to address your capital needs. The loan includes a principal amount and the interest that you will pay-off over a period of time. A term loan is usually given for a period of 1 year to 5 years. Term loans often have lower interest rates than short-term business loans due to the longer repayment cycle and less risk for the lender.

Short-term Business Loans

Next up is the above-mentioned short-term loan which is a condensed version of a term loan. The duration of these loans ranges up to 18 months and they have a slightly higher interest rates due to the reduced repayment window and higher risk involved for the lender. However, short-term loans do give you the advantage of repaying your debt faster and getting more lenient credit terms on your next loan. Short-term finance is also a great way to improve your business credit score quickly.

Equipment Financing

These loans are approved for the purchase of critical equipment for a business. In most cases, the purchased equipment also works as the collateral or security for the amount due. An advantage of equipment financing is that you can secure up to 100% of the equipment value as a loan. Since there is collateral involved, equipment financing also gives you the advantage of lower interest rates on your business loan.

Revolving Credit

Some banks and NBFCs offer their trusted customers with a line of credit. It allows the partner businesses to withdraw sums in excess of their current business account balance. The excess amount, up to a limit, is considered a loan and attracts interest. The facility of credit is restored once the customer repays the overdraft amount with interest. This is quite useful for small businesses who have unstructured cash-flow from invoices.

How these loans help your business?

  • Term loans offer easy repayment and a relaxed repayment period in excess of 1 year. These are high-value loans and hence allow you to make large investments for growing your business.
  • Short-term loans offer quick finance for a limited period of time and are great for smaller expansion plans, streamlining working capital and taking advantage of immediate business opportunities.
  • Equipment financing lowers the cost of upgrading your production lines and hence help you save time, increase the quality and quantity of production and create goodwill for your business.
  • Revolving credit or line of credit is more of a fallback mechanism when your business needs that little bit of extra funding to manage production and sales channels.

All-in-one business loans from Lendingkart

Lendingkart Finance offers all-in-one business loans which include the benefits offered by term loans, short-term loans, equipment financing, and revolving credit. Lendingkart offers business loans up to 1 Crore for a period of up to 1 years for eligible businesses. The loan terms are decided through business analytics, which means that you get the best available rates as per your business type and recent financial performance.

Lendingkart business loans also allow you to select flexible repayment options such as bi-weekly or monthly installments to service your loan. Furthermore, you can choose to repay the entire loan without any prepayment penalties after the payment of first EMI or bi-weekly installment.

Benefits of Lendingkart business loans in comparison to the loan products listed above.

  • High ticket value of up to ₹ 1 Crore with a 1-year repayment window to match the benefits offered by term loans.
  • Ticket value starting at ₹ 50,000 to give MSME borrowers the option of small-ticket short-term finance of 1-12 months. The difference in minimum and maximum ticket size also increases the probability of getting institutional finance for SMEs.
  • Once again, the higher ticket value and unsecured nature of Lendingkart business loans means that your business can acquire costly equipment without the risk that comes with collateralizing your business finance.
  • Auto-renewal of business loan amount upon full-repayment without any additional documentation or processing charges. Meaning, Lendingkart business loans can act as revolving credit, that is higher than an overdraft facility, for your business.

Other benefits of Lendingkart business loans include, online only application and approval process which reduces the turnaround to just 3-days, and minimal processing charges of 1-2% based on the principal amount of your loan. Interested? To apply for a business loan, visit us today, at www.lendingkart.com.

Why Your Business Loan Did Not Work out the way you Planned

You applied for a business loan and your application was approved after a lot of back and forth with the bank. Finally, you received the funds in your account and set about implementing the changes that your organization needed. However, six months down the line, you are paying the loan EMIs every month but the positive change in operations and profits that you expected have not materialized. Now, you are left with a debt to service and nothing to show for it. Have you ever wondered why some of your business loans never work out the way you planned?

Today we are sharing 5 things which may have gone wrong with your business loan planning.

  1. Deciding to get a business loan: Sometimes, the decision of applying for a business loan without actually needing it can leave you with unnecessary debt. If you were lured by a lucrative loan offer and simply applied for the sake of it, then it’s unlikely that the investment will boost your business in any significant way. Business loan planning is a strategic exercise that requires assessment of all your finances, marketing exercises, operational capabilities, inventory management, and customer demand. If there is any gap in either of these departments, which requires additional capital infusion, and if you do not have that kind of money in your business bank account, only then should you think of business finance.
  2. Amount of business loan: On the other hand, if your business actually requires business finance, and you fail to assess the amount needed for the purpose, it becomes another missed opportunity. Here, the equation works in both ways, both under assessment and https://www.lendingkart.com/blog/why-fintech-lenders-have-become-the-best-choice-for-business-finance/over assessment of business loan requirement are detrimental for your enterprise. First, if you under assessed the capital needed to scale up operations or streamline working capital, then surely you would not be able to get the desired results. Second, if you over assess the business loan requirement and get a loan for that amount, then you are left with surplus amount in your bank. While this may feel like a good thing, it is not. You now have a bigger business debt to service and having an amount that is surplus to requirement may lead to superfluous spending.
  3. Spending the loan money in one go: In this instance, your business might have a genuine requirement, and you may have applied and gotten a loan as per your business needs, but if you fail to stage the loan spending properly, the desired results may not materialize. When you put money in something new, it should be done in a stop and go manner to assess the actual impact of the investment. Having a plan in your head is one thing and operationalizing things on ground is another. If you spend the loan money in one go, you will not be able to reset your strategy if something goes critically wrong during implementation. Hence, leaving you with a debt and an unfinished task.
  4. Unplanned debt consolidation: Apart from operational planning, sometimes business loan planning for debt consolidation can also go wrong if you fail to recognize the patterns in your debt repayments. For example, if your business has a number of debts, all divided into EMIs, and you take a debt consolidation loan without optimizing its tenure as per your total debt, then you will end up with a huge monthly EMI – something which you were trying to avoid in the first place. Similar things can happen with the interest rate and principal sum of your debt consolidation loan as well. Therefore, if your debt consolidation loan is not working as planned, it might be a result of your failure to consider the principal amount, business loan interest rates and tenure properly.
  5. Using the loan for a different purpose: If you took a business loan for expanding operations but used the funds fully or partially for marketing purposes or vice versa, it will definitely spell trouble for your enterprise. In the first case, you will have an expanded customer base but no product to show for it, and in the second instance, you will have inventory but no market to sell it. All we are trying to say here is that, when you plan a business loan, you have an objective in mind. But if you divert funds to other things as they come your way, then the original objective gets lost in translation and you end up with a debt.

So, when you apply for a business loan online or offline, plan ahead, use the funds wisely, and do not divert your attention from the principle objective. However, it is never too late to turn things around if your business finance is not working as planned. There alternate ways to get business finance these days which can help you secure instant business loan to fix things up. For example, apply for a business loan with Lendingkart and get a business loan up to ₹ 1 Crore within 3 days. Lendingkart offers faster processing, fair interest rates and flexible repayment using business analytics that optimize each loan for individual business requirements. To know more, visit us at www.lendingkart.com.

Machinery Loan without Security in India – New Business, Documents

Machinery Loan in India

Machinery loans are a type of business loan that help manufacturers, and other such business proprietors acquire financing in order to buy and purchase new and more efficient equipment and machinery for their business ventures. This is a great tool for it allows the business to increase its overall productivity while retaining its normal operating parameters.

Machinery loans are a lucrative option since it helps business head and manufactures to get a hold of better and more powerful equipment, which helps them increase productivity and turn a higher profit from sale and distribution.

Documents required for a Machinery Loan in India Without Security:

If you are looking to opt for a loan to facilitate equipment financing, then there are certain documents that must first be procured and made ready.

1. Proof of Business: For proof of business, one must keep at hand a certificate of practice that states the nature of business. This certificate acts as legal proof of the legitimacy of the business and establishes the reason for the machinery loan subsidy.

2. Past accounts: The financing and the accounts for the last 3 years must be attached with the rest of the documents. The accounts for the past 3 years are required to understand the amount of revenue that is earned by the business or company.

3. Residential proof: Proof of residence of the business and/ or office must be provided. For this, the company PAN card or any legal document that has affiliation with the company’s residential address may be provided.

4. Identity proof: For identity proof, the KYC or “know your customer” documents must be attached with the rest of the forms and documents to apply for a machinery loan in India.

Benefits and Advantages of Machinery Loan:

Running and managing a manufacturing business is not an easy task since you are required to meet the target demand for your products. At times, manufacturing units have a deficit of financing and are unable to upgrade and buy better equipment to keep up the target demand.

In such situations, a machinery loan can prove to be beneficial in getting hold of the financing to purchase the upgraded and better-performing machinery to make ends meet.

1. Increased productivity: Having a machinery loan allows the purchase of better equipment that, in turn, greatly increases the overall productivity of the firm. More number of units can be produced in the same or even a shorter period of time, which have a great effect on sales.

2. Quality products: Since machinery loans allow businesses to gain better equipment, the quality of the products that are produced from the upgraded machine is also better and more sophisticated. Better products also imply better sales and increased trust by the customers in the manufacturing company.

3. Reduced chances of a defect: When in the line of manufacturing of any product, you always run the risk of having a defect. This defect may be in the production machine itself or may be in the products that it churns out. By having better equipment through machinery loans, chances for such defects are greatly reduced and increases the finesse of the production chain and the final products.

4. On time production: better equipment allows for having a better turnaround time. Products can be produced within the time limit and can increase the productivity of the manufacturing company as a whole.

Applying for a machinery Loan in India through LendingKart:

LendingKart offers businesses and new startup owners the simple option of getting a business loan. We at LendingKart offer different types of business loans. From working capital loans to MSME loans and Business loan for women, one can find the perfect loan for their business from across 1300 cities in India.

Applying for a business loan on Lendingkart is a simple four-step process that is easy to understand and follow.

Step 1 – Check for eligibility: To apply for a machinery loan for a new business, one must first check if they are eligible to apply for the desired loan. The criteria for eligibility is all spelt out on the site itself, and one simply must compare it to their current situation.

Step 2 – Submit loan application: the next step is to fill out the application form for the desired loan. The application is a completely online process where you simply must fill out the details regarding your business and yourself too. After filling out the online forms, one simply has to click the submit button to do so.

Step 3 – Await sanctioning: After submitting the application form, all one has to do is now wait for the evaluation of your application. After evaluation, an affair sanction is proposed.

Step 4 – Acquire the funds: After evaluation and when your application gets successfully sanctioned, you will receive your machinery loan for a startup which you can then proceed to use to increase productivity and expand your business.

Fees and charges for Machinery Loan on LendingKart

Machinery Loan Charges/Tenure
Interest Rate 1% to 2%*
One time Processing Charge 2% of the Loan amount
Tenure 1 month to 1 year
Loan Amount Rs. 50,000 to 1 Crore
Part Prepayment Charges Rs. 0
Pre-closure Charges Rs. 0

FAQs on Machinery Loans

1. When are the fund’s transferred after loan application in LendingKart.com?
After submission and due sanctioning of the loan application, the funds will be transferred in 3 days.

2. Are there any hidden costs or charges for a loan application on LendingKart?
No, there are no extra hidden costs for application or pre-closure for any type of loan on the LendingKart website. All charges and fees are laid out in a detailed fashion.

3. How long is the repayment period for a machinery loan?
The repayment period on equipment financing loans can be as short as 36 months and can even extend out for 10 years. The repayment period highly depends on the amount of machinery loan and the revenue that is earned by the manufacturing business henceforth.

4. How do I calculate the EMI amount on the machinery loan?
You can easily calculate the interest and EMI and even get a stipulated repayment period for certain amounts by using a machinery loan EMI calculator. You can find multiple calculators online and use them freely to adjust your equipment financial proceedings.

5. What is the loan amount on LendingKart.com?
On LendingKart, once can apply for a loan for up to 2 crores in a matter of 3 days.

Also Read:

5 Clever Small Business Financing Options in India

Finding the Best Option for Refinancing Your Business Loan

Business loans allow a small or medium enterprise to expand its operations, streamline working capital, and boost manufacturing. In India, both banks and non-banking financial companies offer business loans and loan refinancing for SMEs. Loan refinancing can help a business save more money in repayments of an existing loan. However, selecting the right lending partner is crucial for a loan refinancing to be of benefit for your enterprise.

Deciding if loan refinancing is right for your business or not

Most businesses apply for business loan refinancing because they wish to save money by getting better interest rates for the remaining principal amount of an existing business loan. Obtaining a loan refinancing deal at lower interest rates is possible in two scenarios. Number one, the market interest rates for business loans have dropped due to government and RBI policies. Number two, your business situation has improved, meaning your income / sales are higher and your company’s credit rating has improved, since taking the business loan.

Other reasons why businesses apply for loan refinancing are, moving from a variable rate loan to a fixed rate loan or accessing equity in a commercial property with a cash-out refinance.

Loan refinancing also allows businesses to move from one financing class to another. For example, recovering a collateralized asset through an unsecured business loan, paying off construction debt with permanent financing, or replacing a long-term loan with more flexible, renewable working capital loan.

The thing to know about loan financing is that there are as many options as there are debts. Ultimately, determining whether you need business loan financing depends on your business goals.

Basic requirements for refinancing a business loan

Different lenders will have different turnover, documentation and verification requirements for refinancing business loans. Where traditional lenders like banks tend to have an extensive documentation policy, instant business loan providers like Lendingkart only ask for the bare-essentials for approving loans and loan refinancing. In general, lenders require profit and loss statements, balance sheets, and tax returns for multiple periods to assess the financing risk and approve refinancing terms accordingly.

Eligibility requirements for a loan refinancing can depend on the type of your existing financing vehicle. For example, if you are looking for invoice factoring, the lender may not ask for your credit score at all because you are simply collateralising the accounts receivables. In this case, a lender maybe more interested in the credit worthiness of your commercial clients.

Helpful tips for refinancing your business loan

There are some things which should be kept in mind before applying for a business loan refinancing. These prudent measures can help you in assessing the true value and benefits of refinancing your business debt.

  • Start with a clear goal that you wish to achieve by refinancing the debt. Sometimes, the right financial product for your need may be different from the one you select for recovering an asset or lowering your interest rates. This means, by selecting the wrong financial product, you may end up losing more money.
  • Evaluate your existing loan, the amount and tenure left, and the interest you will be paying. Compare these things with the principal amount of your new loan, the tenor and interest payments for the refinanced loan, adding prepayment penalties and new loan processing charges to the total cost. This will give you a definitive picture of the financial vehicle’s viability.
  • If you are servicing parallel business loans and are considering business loan consolidation, then do the above mentioned calculations for all loans before making a decision. The advantage of consolidating business loans is that you need to pay a single EMI instead of several fractured transactions every month. However, missing critical financial details such as tenor and interest rates alignment can lead to a significant increase in the monthly EMI amount. Read more about EMIs on EMI Calculators and Business Loans – Facts and Myths.
  • Look for loan refinancing deals online. Have a closer look at the payment terms, minimum interest rates, collateral requirements, processing charges and prepayment process of the lender before applying for loan refinancing.

At the end of the day, loan refinancing is just like all other financial products and services which promise to unburden your financials. When done right, refinancing can bring huge benefits for your business. But if done wrong, it can also alter your financial wherewithal and disrupt operational readiness.

Get in touch with Lendingkart

Lendingkart is a leading NBFC in India, offering small-ticket finance of up to ₹ 2 crore for SME owners and startups. We have expert advisors in our employ who can assist you in selecting the right loan refinancing vehicle for your commercial debt. Moreover, you can also avail renewable business loans at competitive interest rates for a period of up to 2 years from Lendingkart. We disburse funds within 3 days of approval and verification of your business and personal information.

To apply for a small business loan, you can either visit our website at www.lendingkart.com or download the Lendingkart mobile app for your Android. To know more about business loans and related topics, follow our blog.

MSME/PSB Loans Within 59 Minutes: is it really possible?

MSME/PSB 59 Minutes Loan

The government announced a new scheme for small and medium business owners as a festive gift, ‘business loans / MSME 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, https://www.psbloansin59minutes.com/home.

  • 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 with attractive interest rates, 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.

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/