Aadhaar and Business Loans – How They are Connected

Aadhaar and Business Loans – How They are Connected

Aadhaar Card has become one of the most important personal identification document of our time. The government issued ID is regulated by the Aadhaar Act and managed by the Unique Identification Authority of India. Here are some steps taken by the government to make Aadhaar an integral part of the Indian financial system.

  • Mandatory linking of Aadhar number to personal and business bank accounts.
  • Mandatory linking of Aadhar number to the Permanent Account Number (PAN).
  • Mandatory linking of Aadhar number to mobile numbers.
  • Linking Aadhar number with LPG Connection, Ration Card and Voter ID.

The deep integration of Aadhar number with other financial and identification services means that the Aadhar Card has become a one-for-all KYC document. An Aadhar Card contains your official name, date of birth and registered residential address, plus it is linked to your verified mobile number – all of which are details sought by financial institutions when verifying a loan application. When you link all your documents with your Aadhaar number, it becomes very easy for lenders to verify your personal and financial details. This in turn facilitates faster business loan approvals when you submit Aadhar as a KYC document.

Today, you can get a business loan online in India by submitting only a few essential documents, such as your Aadhar Card, Business Registration Certificate, Business Account Statements and Tax Compliance Certificate. Moreover, Non-Banking Financial Institutions such as Lendingkart Finance, offer business loan interest rates which are more flexible than commercial bank rates.

Lendingkart also promises loan amount disbursal within 3 days of document verification, which is incredibly faster than getting a business loan from a bank. To get a Lendingkart Business Loan you have to simply sign-up for a free-account and provide a few details about your business. Lendingkart loan amount calculator and business loan interest rate calculator will then process your details and offer a custom business loan amount, just for you.

Once you confirm the amount, your business loan application will be processed pending document verification. You can simply upload digital copies of your documents in your account and track the entire business loan application online.

Link your Aadhaar to your bank accounts and mobile numbers today, the deadline for doing so has been extended beyond March 31, 2018 for an indefinite period. But the linking is still mandatory and comes with its own benefits.

To apply for a business loan with Lendingkart, click here.

Demystifying MSME Loans

MSME Loans – Risky and Profitable Business Types

Micro, Small and Medium Enterprises are the largest employment providers in India. Their contribution to overall employment in the country is pegged at 69%. Also, the MSME sector is responsible for almost 45% of the manufacturing industry and drive 40% of our total exports. These are significant numbers, and therefore, the growth of MSMEs has been a priority of successive Indian governments.

However, for growth, the MSMEs need investment, and the readily available source of investment to them is a business loan. Banks and commercial institutions called non-banking finance companies (NBFCs) are the two main providers of business credit for MSMEs in India. An average Indian MSME needs to pass a number of financial litmus tests before it can get an unsecured business loan or a working capital loan.

Financial institutions give priority to businesses which are considered risk-free and profitable. While it can be argued that every business can be prone to risks, there are a few benchmarks which can assuage the lender’s apprehensions.

A Registered Entity

A registered business entity which complies with the laws of the land establishes a trust in your company on the lender’s part. On the other hand, when a business lacks the necessary statutory paperwork, a lender is right to be apprehensive.

Therefore, getting a business registration will not only get you faster loan approvals, but will also remove any doubts about the legitimacy of your enterprise.

Age of Business

The second factor that distinguishes between a risky and profitable business is its age. While a short-term business idea can also be profitable, the lenders usually require at least 6 months of performance reports before sanctioning a business loan or line of credit.

If you are seeking an MSME loan, then it is better to apply for a loan after completing 6 months or more of operations. Another reason to that is because financial institutions place limits on the period within which you can reapply for a loan. For instance, if you are 5 months into the business and your loan application gets rejected, a lender policy may dictate that you can only apply again after 3 months.

That is another reason why you should never apply for multiple loans from multiple lenders at a time.

Credit History and Profitability

The bank or NBFC that provides unsecured business loans will scrutinize your business account statements to assess the risk or profitability of your venture. If you are unable to maintain a consistent cash flow and retain enough cash at bank to meet your liabilities, the lender will put you in the risky category. In case you are making a good profit, the lender will readily offer loan terms.

Also, if you have a steady cash flow and cash at bank but are not repaying your existing loans on time, it will reflect in your business credit history. Such behavior will lower your credit score and increase the risk factor in a lender’s reckoning.

Type of Business

There are certain types of businesses which are considered risky from an investment point of view. For example, dealing in real-estate, jewelry, precious metals, arms and ammunition, crackers, and other perishable goods involve a high risk-to-return ratio and therefore, given lower preference by a lending firm or bank.

If your business falls into the high-risk category, make sure that you have a solid financial report card to get a business loan.

Getting an MSME Loan for your business

A non-banking financial company is more likely to offer better loan terms for a business because of its in-depth scrutiny and flexible policies towards MSMEs. Lendingkart, a leading NBFC lender in India, offers business loans with customized interest rates along with a flexible EMI schedule.

To know more, visit www.lendingkart.com

 

Credit History – How It Gets Better Loan Amounts

Credit History and its Importance

When you go for a business loan, the one thing that matters the most is your credit history or business credit score. Credit history is basically a statement of your loans and repayments in the past. Credit rating is assigned by rating agencies such as CIBIL and CRISIL.

Here are the benefits of having a good credit history.

Faster and Better Business Loans

A good credit score indicates that you have been paying your dues regularly and in a timely manner. This bolsters your business’s standing in the eye of the bank or the NBFC.

When the lenders see that your business is in the green of the credit scale, they will offer better loan terms. You will be able to secure a higher loan amount, a lower rate of interest and flexible repayment options with auto renewal terms.

Leasing Premium Office Space

The benefits of credit score are not limited to getting working capital loans or commercial loans only. We all know that a premium location can work wonders for your business operations. Landlords of premium properties also ask for credit reports these days to ensure your business’s ability to pay the (higher) rent.

Attracting Investors

Apart from business loans, investments are another source of financial help for budding entrepreneurs. A good credit score indicates healthy business practices and a good ROI. Thus, having a good credit history will build investor confidence in your business.

Therefore, it is quite important for a modern business to retain a healthy credit score. There are several things that can help you achieve that such as financial prudence, asset and liability management techniques and business loans.

How a business loan can help you maintain a good credit history?

Getting a loan and repaying it in a timely manner will build up your credit history. However, you must be very careful with the terms and conditions for your first business loan.

It might be that the interest rates for your first business loan are on a higher side but flexible repayment terms can offset that disadvantage. For example, Lendingkart Finance offers unsecured business loans up to ₹1 crore with options to repay in fortnightly or monthly instalments. If you want to pre-close your business loan after the first EMI, there are no pre-closure charges as well.

Such loan terms make it easier to repay your working capital loans and get a higher credit score for your business. To know more, visit us at www.lendingkart.com or download the Lendingkart smartphone app.

EMI Calculators and Business Loans – Facts and Myths

EMI Calculators and Loans – Facts and Myths

When you search the internet for getting a small business loan for your enterprise, a number of business loan EMI calculators and loan offerings pop up in your search results. For a person applying for their first commercial loan, it might get confusing. This post helps you in understanding the formula used by an online EMI calculator to calculate the monthly instalment for your MSME loan. Furthermore, we try to dispel some common myths associated with business loans.

How EMI Calculators Work?

EMI means Equated Monthly Instalment. It is basically the amount you pay every month until the loan is paid in full to the lending institution. Every EMI has two components, principal and interest. Both components are paid off with every consecutive EMI payment.

Here is the formula used for calculating an EMI –

emi calculators formula

Using the formula, you can self determine your monthly EMI on a business loan. Lending institutions such as banks and NBFCs charge a minimum processing fees and other charges for disbursal which are generally deducted from your total loan amount.

Benefits of Business Loans

Unsecured business loans let businesses fund their exigencies and can be used for expansion or to meet working capital requirements. Also, unsecured business loans are one of the quickest ways to raise liquid capital without putting up a collateral or security.

NBFCs such as Lendingkart offer quick renewal of loans upon repayment without any extra charge, which means you can easily maintain your working capital in-flow indefinitely.

Myths Associated with Small Business Loans

There are several rumours and myths that float around the web and in business circles about getting a business loan from an NBFC or banks. However, not everything you see or hear online is true.

Myth 1: Getting a business is the hardest thing to do

Obtaining a business loan is not an insurmountable task. You can reduce a lot of frustration by doing some due diligence before applying for a small business loan. With your documents and eligibility requirements in order, you can easily get an unsecured business loan from an NBFC or a bank.

Lendingkart promises loan amount disbursals within 3 days of document verification. What’s more? The process is completely online. You can simply login on the Lendingkart website or mobile app to apply for a business loan.

Myth 2: A Perfect Credit Score is Required for Getting a Business Loan

While your CIBIL score will be taken into account by the lending agency, it does not have to be perfect. A good CIBIL score that is more than 700 is mostly enough to qualify for a business loan. There are a number of other factors such as your business’s health, years of operation and profit margins, which are considered by the lenders.

Myth 3: The Best Way for Getting a Business Loan is Through a Bank

Well, this is no longer true because banks have a very narrow product portfolio considering the flexible credit requirements of modern MSMEs. Therefore, Non Banking Financial Companies are a much better choice for availing quick working capital loans and unsecured business loans.

Along with fast processing times for MSME loans, NBFCs also offer the ease of renewal and waiver of pre-closure charges.

Concluding Thoughts

As the digital reforms to our economy take off, getting online finance for business is going to become even more easier. At Lendingkart, we have already limited the process of getting business loans to a few simple steps. You can use our online EMI calculator to plan and manage your monthly instalments as well.

To apply for a business loan, click here.

How to Get a Small Business Loan for a Startup

Small Business Loan to Start a Business

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

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

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

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

How to Get a Small Business Loan to Start a Business

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

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

Coming to alternative lenders, they make the process rather hassle-free and easy to get through. Some of the advantages that non-financial banking institutions offer are:

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

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

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

Process to get a Small Business Loan to Start a Business

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

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

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

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

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

Of course, if you have a business that is already 6 months old or more and has a revenue of INR 12 lakhs or more, you can always apply for a working capital loan at Lendingkart!

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

Lendingkart offers Attractive Interest Rates for SME Loans

Small and medium enterprises in India are growing at an exponential rate. The Indian Government has launched several schemes for their benefit. Furthermore, the introduction of GST and online portals has increased the ease of doing business in India. You can now quickly gain approvals for new projects or much needed expansions. However, to get things started you will need ready capital for investment, and at Lendingkart Finance, we do just that for you. Lendingkart offers attractive interest rates in the range of 18-27% for short term SME loans.

With Lendingkart’s unsecured business loans, you can get small-ticket short term investment on-the-go. We have made the process completely online so that you can monitor the progress of your application in real-time. Lendingkart loans are approved for businesses having profitability in 2 previous financial years with a minimum annual turnover of Rs. 6,00,000. Other factors such as applicant’s age, income tax returns, and business stability are also used in determining the loan eligibility.

 

Easily Calculate Your EMIs

We offer a business loan EMI calculator which you can use to get an idea of EMI amounts you will be paying. The EMI is calculated based on the Lendingkart interest rate offered to you, the loan amount and tenure. For example, the EMI payable for a one lakh rupee loan, taken for 12-months at 18% interest per annum, will be Rs. 9,168. In similar scenario, if the interest rate is 27% p.a., then the EMI will be Rs. 9,602.

Attractive interest rates for SME loans. Find yours through the EMI Calculator

 

Needless to say, the higher the amount of your loan, the higher the amount of your EMI. The EMI calculator also helps you in budgeting and adjusting your finances to meet your EMI payment schedules.

 

The benefits of taking a business loan from Lendingkart

 

There are several benefits offered by Lendingkart in comparison to banks providing similar loans.

Attractive Interest Rates from Lendingkart

 

Applying for an SME Loan

Terms

Attractive Interest Rate

18% to 27%*

One time Processing Charge

2% of the Loan amount

Loan Duration

Minimum: 1 month, Maximum: 1 year

Loan Amount (min to max.)

Rs. 50,000 to 1 Crore

Part Prepayment Charges

NA

Pre-closure Charges

Nil**

 

*based on your business’s health and credit score

**Pre-closures are only allowed after the first EMI has been paid in full

 

We have a proprietary method of calculating interest rates which evaluates your loan application using advanced analytics. By enabling technical inputs and outputs we have made the process of calculating interest rates faster and more accurate. The attractive interest rates are calculated by factoring in several things listed below and are different for every partner SME.

  1. Loan Amount: The amount that you apply for, pending approval, counts towards deciding the interest rate. Generally, the higher the amount of loan, higher the possibility of a lesser interest rate from Lendingkart.
  2. CIBIL Ranking: If your CIBIL score and history are good, the interest rate we charge will be lower and vice versa.
  3. Balance Sheet: If you are earning good margins, we will take that in consideration while deciding interest rates on your loan.
  4. Age of Business: For long running enterprises, we offer special discounted SME loan rates.

Business Friendly Loan Approval and Pre-closure Charges

 

We do not believe in charging extraneous charges and fees from our customers. That’s why we have one of the friendliest pre-closure policies – there are no pre-closure charges. After paying the first EMI, you can prepay the full loan amount, anytime. Added with the benefit of attractive interest rates, it is a great way to finance any short term business requirement.

Also, we only charge 2% of the loan amount plus service tax as processing fee. It’s a one-time fee which you don’t have to pay if you choose to reapply for the same loan amount upon closing.

Minimum documentation and turnaround time

 

When applying for a business loan with Lendingkart, you have to submit only a handful of documents. And we process every loan application within 3 days of document verification.

Documents required by us are:

  1. Address proof (Aadhar Card, Voter ID, Bank Statement, Proof of registration, etc.)
  2. Identity Proof (Passport, Aadhar Card, Driving Licence, PAN, etc.)
  3. Proof of Business (PAN, GST Registration, Trade License, Registration Certificate issued by RBI or SEBI)
  4. Copy of PAN card and Income Tax Returns for last 24 months
  5. Bank Statement of last 12 months

 

To know more about applying for a business loan with Lendingkart, head over to our website and sign-up for a free account.

5 Clever Small Business Financing Options in India

For a new small business in India, like everywhere else globally, finance is the key to success and sustenance. Efficient and consistent fundraising is not the easiest of jobs. Still it does not have to be the toughest either. Traditionally banks tend to be the first and most preferred source of raising capital. Though they do not necessarily have to be the only option.

 

For a business to get to the stage of revenue generation and a profit making stage, the initial solid push is critical. That push comes from money. It might be for a brand new business starting out or a small business looking to scale up.

 

Here a few ways in which that money can be raised smartly.

 

Alternative methods to raise finance for a small business in India –

 

With the digital economy taking flight with rocket boosters, one has to think beyond banks. There are a number of other reliable options that can be explored. Such as:

 

Angel Investors 

While most business owners are familiar with angel investors, in simple terms, these are individuals with interest, initiative and investing power looking to vest in businesses. They keep a close watch on sectors that they think will work best for them and will be interested to fund businesses that meet their profitability criteria. Typically they operate as part of networks where they collectively scour through proposals and business plans to finally decide which ones they are going to support. Getting the nod of an angel investor(s) to fund a business is a big deal for most businesses. Depending upon their background and expertise, angel investors also tend to take a keen interest in the business and offer advice and suggestions for improving the revenue generation. Need to know the 8 most prominent angel investors in India? Read this article on Forbes online.

 

Crowdfunding

Crowdfunding is already a great fundraising option albeit a fairly competitive space. Given the popularity and ease of accessibility it’s fast turning out to be a preferred method for particularly startups. Crowdfunding literally means getting individuals to invest or give money for a business idea by putting it out there on a crowdfunding platform. Of course, the idea has to have potential and the investors need to see some ROI before they commit. Even so, this one is a fairly new age method and those who know how to play it properly can get good support for their business or business idea. This link lists the top 15 crowdfunding websites/services in India.

 

Lending Institutions

There are a number of independent lending institutions that can help raise finance for a small business in India. The requirements to secure a loan can be exhaustive for a small business at most banks. Unlike banks, these institutions are willing to take the risk to finance a small but solid business if basic eligibility criteria are met. This is a very effective source as there are high chances that the loan will come through. These institutions exist to cater to the newer and smaller entrepreneurs who have trouble taking their proposals to traditional sources. While they don’t come with as great a repute as banks, the financial help provided by them is great for most small businesses. Lendingkart is one of such institutions in India.

 

Bootstrapping

While mostly explored by startups, bootstrapping can be an effective way of securing finance for smaller existing businesses as well. A small business requires capital when wanting to scale up or expand. It can also be for acquisition of equipment, logistics or payroll management. Bootstrapping involves either investing one’s own funds into the business or getting some money from friends and family at low interest rates. It’s imperative to understand that this method works if the loan requirement is not too high. As the popular saying goes, one shouldn’t keep all their eggs in one basket.

 

Venture Capitalists

Funding from a venture capitalist is like finding a diamond in a coal mine. It’s hard to come by, but scores incredibly big points for a business owner. Most VCs prefer to support existing small businesses as opposed to startups. If they find proof of potential and scalability, they come on board not only with money but with expertise, mentorship and a lot of guidance. They tend to stay with the business till it’s either acquired by someone or till it goes public. The only possible downsides are that they exercise control and there is a lot of accountability towards the VCs.

Credit Scores – Part 1: The What, Who and When

Introduction

“Sorry, we won’t be able to process your loan application because your credit score is too low.” As a person who has availed loans before, I can testify to how much this single statement can hurt. Especially when there is a pressing need of funds, and you know that the low credit scores are mostly your own folly. Banks and non-banking financial institutions do not take any pleasure in harming your credit score on purpose. Delays in payments, improper follow-up, willful defaults are just some of the culprits that lead to a bad credit score and report.

We’ll help you know what your credit report is, how to read and understand it and some tips on improving your credit score faster.

 

Credit Bureau, Credit Scores and Credit Reports at a Glance

I’m sure most of you would be familiar with the term ‘CIBIL Score’. CIBIL is one of the four institutions in India that collect and compile credit information of individuals and business entities from across the nation. Along with Credit Information Bureau of India Limited (CIBIL), Equifax, Experian and CRIF High Mark are the Credit Information Companies that deal with credit data in India. CIBIL is by far the oldest and the most popular, having its origins in the year 2000. Experian has been in existence since 2006 and achieved a license of operation in 2010. Highmark and Equifax also received operating licenses in 2010.

Lending, be it for personal, business or residential purposes, is always laden with risk. Credit Information Companies provide the data to lenders that helps them take a rather calculated risk instead of a blind one. Based on how a business has been performing financially or how a person’s bank records are, credit scores are given by these agencies within a range specific to each of them. A small comparative chart of the same is shown below –

 

CIBIL

Equifax

Experian

CRIF High Mark

Score Range

300 to 900.
900 the best
300 the worst

1 to 999.
999 the best
1 the worst

300 to 900.
900 the best
300 the worst

300 to 850.
850 the best
300 the worst

Good Credit Score Threshold

700 and above

650 and above

700 and above

720 and above

Poor Credit Score Threshold

600 and below

500 and below

600 and below

640 and below

 

The good and bad thresholds are the trends that are followed by most banks and/or NBFCs when deciding to issue loans or credit cards. There might be institutions who can define their own set of credit scores that they consider good or bad. This is just a general idea. You might notice there are gaps of quite some values in between the good and bad score thresholds. These are the popular ‘gray’ areas.

If your credit score falls in these gray areas, it is mostly up to the lender whether to approve or reject a loan or credit card. There are some people for whom the CIBIL TransUnion score would be in negative or in single units. In such cases, mostly the person has never had any loan or credit facility ever. For them, most lenders do quite a few background checks, but if everything is fine, loans and credit card approvals are not far away.

Credit scores are just a summary whereas credit reports are the more important reports that you should be keeping an eye out for. These reports deal with extensive information and need to be read carefully. Every loan you have ever availed, and every credit card you have used is listed in here, along with the payment delays, delinquency status and status of the credit instrument. Sometimes, there might be inconsistencies in these records and based on the same, you can even file a dispute with the respective credit bureau. Based on the validity of the dispute claim, they will get in touch with your lender and sort out the problems in your report.

Each bureau takes a certain amount of time to generate your report. Every report generated comes with an associated amount of fees. The following table gives a general overview of the rates and time taken by these bureaus for generating credit reports. Additional services offered by the bureaus is also mentioned in the table –

 

CIBIL

Equifax

Experian

CRIF High Mark

Services

For Individuals –

CIBIL TransUnion Score

Credit Information Report

Market Insights

For Companies –

Portfolio Review Reports

CIBIL Company Credit Information Report

CIBIL Bureau Analyzer

Extra services –

Portfolio Management

Fraud Prevention

Customer Acquisition

Custom Solutions

For Individuals –

Equifax Credit Information Report

Equifax Alerts

Equifax Portfolio Review

Equifax Risk Score

For Companies –

Credit Risk and Fraud Management

Portfolio Management

Industry Diagnostics

 

For Individuals –

Experian Credit Information Report

For Companies –

Customer Acquisition

Collection and Money Recovery

Customer Management

Data and Analytics

Customer Targeting and Engagement

 

For Individuals –

CRIF High Mark Credit Report

Portfolio Management

Alerts

Geo Analytics Consulting

For Companies –

CRIF High Mark Credit Report

PERFORM Score

Portfolio Management

Extra services –

Verification

Data Quality Management

Credit Assist

ETA for Credit Report

5 minutes for CIR

7 days for Detailed Report

10 days

5 minutes for paid CIR

3 days for free CIR

5 minutes for paid CIR

3 days for free CIR

Fees

Free once a year INR 500
INR 800
INR 1200
based on subscription

INR 400

Free

INR 399 for detailed report instantly

Free

INR 399 for detailed report instantly

 

When to Use What

Normally, getting a credit report and score from any one bureau should work for any individual or company. If you are running a small business, it is advisable to get separate reports for yourself and your business from at least two bureaus every 6 months. These reports will also have varying credit scores depending upon the usage and repayment of your loans/credit cards and EMIs/bills respectively.

That way, you can easily keep track of what problem areas are in the reports that can be fixed. Often, sometimes rectifying incorrect data in the reported information can go a long way in increasing credit scores. In all the bureaus, you will need at least one government-issued identity proof and acceptable address proof to raise a dispute. If you have multiple credit cards or multiple loan accounts, it can be a bit tough to keep up with the process of CRIF High Mark. Experian and CIBIL do not require as many multiple checks to show you the credit report and the corresponding credit scores.

With a basic overview of credit scores here, we are presenting you some links where you can access an annual free credit report from some of these bureaus –

  1. Free CIBIL Report (Once a year) – https://www.cibil.com/freecibilscore
  2. Paid Equifax Score and Credit Report – http://www.equifax.co.in/consumer/forms/credit_report/en_in
  3. Free Experian Report – http://www.experian.in/consumer/experian-free-credit-report.html
  4. CRIF High Mark Report – https://cir.crifhighmark.com/Inquiry/B2C/B2CommercialPortal.action

Did you find something in your reports that you don’t remember? While you can raise a dispute any time, it is better to be safe in the future. Perfios is a money manager that can track any financial account for you and is free for individual users and can include small businessmen effectively. Do check it out!

If there’s something in your credit report that you don’t quite understand, read our next article to get an insight into how to read the more complex reports from bureaus.

Why Dual GST and How it will affect your Business?

Businesses all over the country have felt the impact of the government’s decision to change the country’s goods and services tax code. The new tax, GST, will change the way our country does business, affecting all businesses engaged in sale/supply of goods or supply of services.

What is GST?

The Goods and Services Tax (GST) is a revised and comprehensive form of previously implemented Value Added Tax (VAT). The GST is an indirect tax and replaces many cascading taxes levied by both Centre and State governments. Supply chains, ERP services, product pricing, etc. will all fall under the ambit of GST.

What is Dual GST?

The Union Government and the States were unable to form a consensus for tax revenue sharing. Therefore, the government has introduced a dual GST system – Central GST (CGST) and State GST (SGST).

Example – If a dealer in Rajasthan, selling goods to consumers within the state, makes a sale of INR 20,000 at 18% GST rate. Then the dealer will collect INR 3,600 as total tax. In this case CGST and SGST will be shared by Centre and State equally as INR 1,800 each.

Effective July 1, both CGST and SGST are applicable on the taxable value of goods and services shipments pan India, except in the State of Jammu and Kashmir.

Impact of GST on your pricing

Implementing GST will reduce the impact of numerous indirect taxes which were applicable on your manufacturing and supply chain. This will allow you to decrease the cost of product and services in mid to long term and pass on the benefits to your customers. Although, for various services, the short-term prices may go up as the tax rate has been raised by 4-6%.

Effects of GST on your SME:

The dual structure of GST is meant to be fairly simple and transparent, with only a handful of CGST and SGST rates being implemented. The new tax regime includes both costs and benefits for SMEs:

• Reduction in the number of taxes you were paying earlier. However, Customs Duty and some other levies are still in place for imports and excepted items under GST

• Reduction in your transactional costs due to simplified tax compliance code and online procedure • On the flip side, GST might increase your operating costs if you do not have tax professionals to look after your annual filings. So, hiring an expert may be your only way to have tax compliance

• Compliance issues may also arise due to the mid-year implementation of CGST and SGST

• If you are running a manufacturing SME the tax burden may increase since the excise laws exempted units below 1.5 crores whereas the limit is now 20 lakhs

Who should register for GST?

• If your business is registered under VAT, service tax or excise duty, you can move your registration to GST. Also, firms and companies with a turnover of 20 lakh or more per annum are mandatorily required to have a GST registration. If your business involves inter-state transactions, GST registration is mandatory for you, regardless of the turnover

• Websites and portals where supply of goods and services is managed are also required to register with GST without exception

• An Input Service Distributor, which means a head office that receives billing for all its branches, is also mandatorily required to register for GST

Have you adapted to the new GST regime, and how much impact do you think it has had on your business? Let us know in the comments.

The sequel to this post will deal with how to leverage GST in getting competitive edge for your business.

Working Capital Management for Small Business Owners

Working Capital Management for Small Business Owners

Any business can have different sources of income and efficient management of the same can work wonders in the running of the business. While startup capital and fixed assets are typically long term, for the day-to-day running of any business, an efficient cash flow structure is necessary. In the light of the same, working capital becomes quite crucial for small business owners.

What is Working Capital Management all about

Working capital management is the relationship between a company’s short term assets and short term liabilities. In simpler terms, it is the way in which a company handles its income generation and expenses. For example, if your company deals in a lot of paperwork and you need prints of documents every second hour, that is an active expense happening almost every day. Getting an office printer would make the expenses considerably less, over the course of time.

Efficient working capital management ensures that any company can run smoothly while being able to repay maturing short-term debt and expenses that might rise in the near future. In working capital management, the most basic tasks revolve around managing inventories, accounts receivable and payable and cash. Inventories in our example can be ink cartridges, blank paper that can be used in the future. While your sales on credit can be a part of accounts receivable, if the printer was bought through a loan, the EMI would be part of the accounts payable. Cash is pretty self-explanatory and is basically used for expenses that can’t happen on credit or are quite diminutive.

Ways in which Working Capital is used

The importance of cash for companies can never be expressed in enough words. Cash in hand is majorly used for three purposes, namely – Speculation, Precaution and Transaction. All the three are quite pivotal in deciding the growth of a small business.

Speculation

Speculation is the scenario where having appropriate cash in hand can aid in taking benefits of special opportunities related to purchase. Suppose a small business is dealing in fireworks. They would normally have stock left from the past year Diwali in their inventory. Let’s presume the business is paying a monthly fee of INR 20000 for storing its stock in a warehouse. The annual fees come to INR 2.4 lakhs. During September, the business gets an offer to receive an amount of new stock (equal to the old stock) at a seasonal discounted price of INR 1.8 lakhs. Here, the cost of the new inventory is less than the carrying costs of the old stock. But it is actually more profitable for the business since the old stock has a depleted value now along with the carrying cost of 2.4 lakhs. The business will do much better if it purchases the new stock at a discount and disposes the old inventory at a discount to small retailers. That way, the business will be ready for the festive months ahead with a new stock that has a much higher chance of being sold out fast.

Precaution

Precaution is when a business holds cash in hand to safeguard against unforeseen situations. Let’s consider our old example of the small business selling fireworks. Speculating on a booming sale in the festive months ahead, the business had bought in new stock on credit, hoping to settle the dues after the sales are done. But due to some state-wide problems, people didn’t celebrate as much and thus, didn’t buy much fireworks. But the business still has to honor its promise of repaying the dues, so it uses the cash in hand to do that.

Transaction

Transaction is perhaps the simplest of the reasons why small businesses should have access to cash in hand. Every small item needed in a day-to-day operation of a business can’t be settled through online transactions. Cash in hand is required for sundry purchases that are then added up at the month end for the expenses.

Tips to Improve upon Aspects of Working Capital

Accounts receivables, cash in hand, inventories, marketable securities and prepayments are current assets that will become cash within 12 months and likewise, account payables, wages to be paid and unearned revenues are current liabilities that need to be settled within 12 months of time. Good working capital management involves keeping the current assets consistently higher than the current liabilities to avoid financial complications or operational problems. Here are some small tips that can help you manage your working capital in your company more effectively. Keeping an eye on these can allow your small business to prosper –

1. Take advantage of float – Float or floating capital is basically the difference between book balance and bank balance. Let’s suppose you have dues of INR 3 lakhs to settle by the 31st of October. However, only INR 1 lakh is supposed to be paid by the 5th of October. Considering that you have INR 3 lakhs cash in hand by September 27, you could use INR 2 lakhs as a short-term deposit if you have no other assured profitable short-term business venture that can pay within a month. The return could be less than INR 1000, but it’s better than nothing. If you like investments, you can check the market and invest in equities for a short term for getting better returns, but this is a riskier approach

2. JIT Inventory – Just-In-Time inventory allows a business to cut down on costs involved in storing stock. Materials are purchased and received in time for the production line or for sales. Though this is quite difficult to achieve, if your relationship with the supplier is good, you can manage this effectively

3. Sales on Credit – Here, your sales play a crucial role. The goal is to shorten the amount of time your customers can take to pay their bills. You could offer a period of 30 days till their bill is due and offer a promotion of 3% discount if the same bill is cleared in maybe, 10 days or less. This allows you to sell more in a short time and pushes your customers to pay earlier to get a discount of 3%

4. Alternative Funding – This method can include availing working capital from banks, NBFCs, asset-based lenders, crowdfunding. In most cases, a genuine business idea, long term efficiency and good revenue generation can get you access to alternative funding rather quickly

5. Timely payments to suppliers – This is the easiest and simplest rule to follow. It goes without saying that if you pay your suppliers their dues on time, you can negotiate better deals and get discounts on your purchases

6. Group Purchase – As a small business, you might not always have access to funds to buy stock at a discounted quantity, or you might not have the available storage to accommodate a bulk of material that you get at a discount. It is always a good idea to look for other small businesses in the state or region who do the same trade as you and pool in resources to get the stock from your supplier. That way, you don’t have to spend a lot and still get to avail the discount

7. Learn the benefits of e-procurement – If you are into electronics, electrical equipment, garments, gift items and the like, you can look into sites like mytradebox.com where you could find interesting items with heavy discounts on bulk orders. These can help you source items quickly at very affordable rates

Working Capital Management and your Small Business

Small businesses aren’t much different from regular, established business giants. They just have a smaller market footprint. While larger businesses have to deal with multiple rules and regulations that they have set for themselves, as a small business owner, you will be much more flexible in making changes to the processes that are followed in your business. Taking working capital management seriously and handling the details through which your cash flows are dealt will definitely make your business a more profitable one. This, combined with social media, ecommerce and data science can work wonders for your small business. But those are topics that will have their own articles. Follow our Lendingkart blog to be regularly updated about the same.