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Financial Management

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.

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Business Strategy, Financial Management

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

 

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Business Strategy, Financial Management

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.

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Financial Management

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.

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Business Strategy, Financial Management

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.
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