Financial Management

How to Get a Small Business Loan for a Startup

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Small Business Loan to Start a Business

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

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

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

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

Eligibility for Startup Business Loan:

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

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

How to Get a Small Business Loan to Start a Business

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

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

Startup Business Loan Interest Rate

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

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

Document & Requirements for Startup Business Loan

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

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

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

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

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

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

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

Process to get a Small Business Loan to Start a Business

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

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

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

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

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

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

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

How to use a Startup Business Loan

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

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

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

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

NBFC Growth in India – Infographic

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Factors That Led to the Growth of NBFCs in India

The transformation of Non-Banking Financial Companies (NBFC) in India in the past few years plays an important role in growth of Indian Financial system. NBFC’s have emerged successful as compared to Banks as their customized product offerings help individuals with their financial needs.

NBFC Credit Market growth is as shown below.

Financial Year Growth
2016 13%
2017 16%
2018 20%

NBFC’s grow at an average rate of 4%-6% every year. Following are the major factors that led to the growth of NBFC’s in India

Understanding the customer

  1. Focus on unorganized & under-served segments of the economy.
  2. Customization of rigid policies to meet customer needs

Customized product offering

  1. Emphasis on a limited line (or often a mono-line set of products) to serve the target customer segment
  2. Adoption of non-standard pricing models for product lines, in-line with the customer profile and inherent risk of lending

Leveraging technology

  1. Reduced time to market and enhanced customer experience
  2. Offering customized credit assessment models with optimized business processes

Reaching out to wider audience

  1. Catering to the needs of Tier-2, Tier-3 and Tier-4 markets
  2. Distribution of loans across several customer touch-points with 24/7 sales and service

Risk Management

  1. Improved governance with agile risk management model
  2. NBFCs continue to grow with Chief Risk Officer (CRO) ensuring the highest standards of risk management.

growth of nbfc in india

Effects of Poor Working Capital Management

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Small and medium enterprises are particularly vulnerable to improper management of their assets and liabilities. Most SME assets are in the form of current assets and their current liabilities are often a source of external finance, given the difficulties of getting a business loan for such enterprises. Oftentimes, SMEs have to resort to vendor financing when facing a capital crunch. Therefore, efficient working capital management becomes critical for the success of a small business in India.

Working capital is the difference between your current assets and current liabilities. It is primarily used for supporting the day to day financial operations, such as the purchase of stock, salary and wage payments, and financing credit sales. In essence, working capital is the lifeblood of a business.

Working capital management is the managerial strategy for creating a balance between the two aspects of working capital i.e. current assets and current liabilities. Working capital management ensures that there is enough cash flow for meeting short-term debt and operating expenses. Efficient management of working capital is a part of effective corporate strategies and helps in creating shareholder value. However, maintaining the liquidity of a firm is also an important part of working capital management as increasing profits at the cost of liquidity can also have serious ramifications for an SME. In case, profits are ignored, a firm cannot conduct operations for long, and if liquidity is ignored, the firm may face insolvency. So, working capital management should be given due consideration in strategic management of a company.

If your cash flow is constantly at odds with your working capital requirements, the reason might be a de-synchronization between one or more of working capital determinants. Here is a list of working capital determinants / reasons why your firm is struggling to acquire the necessary working capital buffer for operational expenses and short-term debt obligations.

Nature of business:

The type of business your company is involved in does have an impact on your overall working capital requirements. For example, trading and investment firms very little capital in form of fixed assets but do require larger working capital funds for operation. On the other hand, firms offering public utilities do not have a huge working capital requirement but do need to invest in fixed assets. So, the first thing you need to check is whether the nature of your business is properly aligned with your financial policy for generating the working capital.

Sales and demand:

Working capital also has a relationship with the volume of sales. Again, this relationship varies based on the type of your business but in most cases requires the deployment of fixed assets to spur growth. So, if yours is a growing enterprise, make plans in advance for a continuous change in working capital needs – and how you are going to meet them – as per the existing sales and demand scenario.

Manufacturing technology:

If you are manufacturing products, using the right technology is crucial for better working capital management in your enterprise. Manufacturing has a direct relationship with increase or decrease in working capital funds. The longer the manufacturing cycle, the higher the firm’s working capital requirements. This, pick and choose the right technology to streamline your working capital and manufacturing process.

Credit policy:

If you have a credit policy that differs too much from the norms in your industry, you may find yourself having working capital troubles. It is good to be able to offer better credit terms to your buyers as the part of your customer acquisition strategies, but it is similarly important to limit that flexibility within the constant of industry norms and practices.

Operating efficiency:

Another factor that relates to the delivery of goods and services is the operating efficiency of your business. It has a direct effect on your working capital requirements. Pushing your operating efficiency to the maximum will not only decrease your working capital requirements but also improve your profit margins.

Price Level Changes:

Change in the price of raw materials, packaging for finished goods, transportation and sales costs, can also increase or decrease your working capital requirements. Being able to anticipate and adjust accordingly to these price level changes is a part of effective working capital management. If you are being let down by the volatile price level changes, consider hiring an expert to stabilize your working capital and other financials.

Supplier Credit:

A firm’s working capital requirements are also subject to supplier credit. If your supplier trusts you enough to grant higher credit in lieu of raw or unfinished goods and services, it can reduce your immediate working capital needs. So, cultivate stronger relationships with select suppliers instead of regularly switching from one to other.

Institutional Finance:

Lastly, the type of institute credit available for your business also has an effect on working capital requirements. If you can get business loans easily, your working capital needs will not suffer. But if your business loan applications are continuously being put on hold, it may not bode well for your working capital and cash flow. In such cases, try applying for a business loan with non-banking financial companies offering working capital finance for SMEs. For example, Lendingkart Finance is a FinTech firm that offers business loans up to ₹ 1 crore without any collateral requirements. Lendingkart’s business loan offers include approval and disbursal within 3-days of verification, which makes it instant business loan, faster even then the Indian government’s ‘MSME 59 minutes loan’ offer.

We hope, these pointers for identifying working capital issues will help you manage your organisation better and grow organically. To know more about working capital finance and how you can get small ticket short-term finance for your growing business, email us at info@lendingkart.com or call us on 1800572 0202.

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

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

Networking is the Key:

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

Always have Results with You:

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

Do not Make Cold Calls:

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

Show them the Money:

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

Get On-board a Start-up Accelerator:

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

Do follow ups:

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

Take Advantage of Online Credit Market:

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

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

Concluding Thoughts

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

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Grow your Business with Quick Small Business Loans

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

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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

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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.

How You Can Raise Funds for Your Startup Business in India

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All startup businesses begin with exciting new ideas and high hopes. However, it is also an unfortunate fact that most startups run into unforeseen financial and operational difficulties within the first year of their operations.

Business researchers often point to a number of reasons that are responsible for the failure of a promising new venture. Yet, the fact also remains that most of these difficulties arise due to inadequate capital.

Capital is the basic requirement for running any venture and no business can be expected to thrive if it does not have proper financing. That is the reason why the concept of investor funding is so strongly embedded in the startup scene. But, raising funds is not only a tedious exercise, it also determines the future of a startup venture. For instance, you may lose control of your business by giving up a large stake in return for capital funding.

There are a number of ways you can raise funds for a startup business, such as bootstrapping or self-funding, crowdfunding, Angel investment, venture capital, working capital loans, and government programs that help MSMEs. Every one of these methods has its own pros and cons. Let’s have a look.

Source:

Pros:

Cons:
Self-funding:

Using funds from personal savings or borrowings from family and friends or both.
  • Easily accessible funds
  • No bureaucratic hassles
  • Flexible interest rates
  • Not feasible for large scale business operations or expansions
Crowdfunding:

Getting funds from crowdfunding platforms by making a pitch and getting capital from interested crowd funders.
  • Helps in marketing as well as financing by creating a public interest
  • Allows you to retain control of your business
  • May help attract future investment from venture capitalists
  • Competition is heavy due to the public nature of the platform
  • So, is the probability of your idea of getting rejected due to too many homogeneous ideas
Angel Investment:

Basically, getting funds from individuals with huge capital worth, willing to invest in new business ideas.
  • An Angel investor can also provide valuable business mentorship along with the capital investment
  • Angel investors are less risk averse
  • The capital provided by Angel investors is often less in comparison to venture capitalists or other business funding methods
Venture Capital:

Venture capitalists are professionals who tend to invest in solid business ideas. However, they rarely seek equity and pull out when a business is acquired or upon IPO.
  • Venture capitalists bring a huge amount of mentorship and business acumen to the table
  • They help you design exit-strategies that allow huge profit margins
  • Venture capitalists tend to take away the control of your business in order to recover their investment quickly
  • Venture capitalists are mostly interested in large companies which have a proven business model
Working Capital Loan:

A loan from a microfinance company or NBFC that especially caters to the needs of small business owners.
  • Loans are unsecured so there is no risk of collateral loss as is with a bank loan
  • A quick business loan can fast track your income generation
  • Helps small businesses gather their bearings before seeking higher investments
  • No legalities and technicalities in comparison to traditional bank loans
  • None that we can think of
Government Programs:

Getting funds from the government subject to institutional scrutiny and meeting the policy parameters.
  • Great way to source funds at low-interest rates along with subsidies and other incentives
  • Very slow, long, and often tedious process that may take months or even years to get an approval

So, now that you know about the various ways of raising capital for your startup business, the obvious question that needs asking is – which one is the best?

Well, if you are looking for a quick and hassle-free funding, it means you have already tapped in bootstrapping sources. So, the next best thing here will be getting a working capital loan from an NBFC.

Faster Business Loans without Security

Non-Banking Financial Companies offer loans for business without requiring a collateral. NBFCs are also business sensitive and hence provide quick business loan approvals and disbursements in comparison to traditional banks. For example, a bank may take up to 15 days to process your business loan application whereas you can get a business loan approval within 72 hours by applying with an NBFC like Lendingkart Finance.

Flexible EMIs, Interest Rates and Prepayment Options

Working capital loans for business come with the added benefits like a flexible EMI schedule, lower interest rates and zero prepayment charges. If you are a budding entrepreneur, these benefits can be a godsend for your business. For instance, the ability to customize your EMIs allows you to plan your repayment in tandem with your invoicing cycle. Lower interest rates mean you are not losing precious capital in interest payments. Finally, if at any stage your business starts generating expected profits and you wish to repay your business loan in full, there are no prepayment charges, fees or penalties.

Conclusion

Raising funds for business establishment and growth is always tricky. There are a lot of checkboxes that you need to tick before getting the capital you need. Furthermore, some of the most popular startup funding measures are also the most crowded ones as other entrepreneurs are also having the same funding ideas. Whereas getting funds by giving away equity has its own pitfalls in the long-run and can leave you without any control whatsoever over your business. Alternatively, you can get a bank loan for funding your business but that process is also marred by slow processing, bureaucratic red-tape and the huge risk of collateral loss.

So, amidst such tedious and discouraging scenarios, getting a working capital loan or a business loan from an NBFC like Lendingkart is the most plausible alternative for funding your startup. Add to that the many benefits of NBFC business loans, and the fact that you do not have to give away control over your business for getting working capital funds, and you have a winner on your hands.

Why Fintech Lenders Have Become The Best Choice For Business Finance

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As we very well know, the public and private sector banks in the country are burdened by an unprecedented NPA problem at this moment. As a domino effect, correctional measures taken by the banks has made it harder for small and medium enterprises to get business loan approvals. Also, banks in India still lack business specific products and services, which makes loan application a cumbersome and time-consuming process, which is the opposite of what 21st century businesses need.

On the other hand, the Indian economy is booming and there is a start-up boom, which means there is an increased demand for small business finance. This disharmony in demand and supply has given rise to FinTech lending, a new age medium of small business finance.

FinTech lenders like Lendingkart Finance stress on a customer centric business model, where the customer has to make the minimum effort possible to get business finance. The idea is to help business owners focus on growth of their enterprise rather than being burdened by financial worries all the time.

Here are the salient features of FinTech finance which make companies like Lendingkart, the go-to financial solution for small and medium business owners in India.

Minimal documentation

Where banks and traditional financial institutions require a ton of physical documentation before a loan application is put into processing, FinTech firms have a completely online business loan application process. A simple upload of soft copies of essential company documents is all that is required to start a business loan application. Check the KYC documents – what you have and what is needed.

Online application and processing

As mentioned above, the online loan application can be completed in a few simple steps, involving an eligibility check, application submission, evaluation and sanction of loan value, and disbursal. A business owner can track his/her loan application status anytime by logging into the FinTech loan account.

Quick disbursal of funds

Unlike bank loans, FinTech loans are cleared faster due to use of patented big data technologies and a combination of online and offline verification processes which save valuable man-hours. The loan funds are released directly into the business account of borrowers instead of issuing cheques or demand drafts. To give you an example, Lendingkart Finance, one of India’s top FinTech lenders, clears funds within 3 days of application approval.

No penalties or hidden charges

In many instances, a small business may become profitable sooner than original predictions and may want to repay the loan in full. A bank will usually charge a penalty for early repayment of loan to make up for loss of interest. However, FinTech with its cost advantage has no such provision. A borrower can prepay the loan in full with no extra charges. Furthermore, traditional banks and NBFCs generally have an array of hidden costs and charges that are deducted from the principal amount, leaving a small business owner well-short of the funds he/she expected. FinTech lenders on the other hand only have a provision for 2% as processing fees and no other charges to be deducted at all.

So, it is no surprise at all that business owners are moving towards FinTech lending to get working capital loans and business expansion loans, as these new-age lenders offer faster and more reliable business loans and services for the digitally connected businesses of the 21st century.

Best Small Business Practices to Adopt in a New Financial Year

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A small business owner is always striving to give his/her business the right environment to thrive. Here, the environment implies having a good workplace, hiring efficient employees, getting the right equipment, developing fruitful relationships and most important of all, gaining access to proper financing and working capital. The last point is most important because every business needs money to operate and without a proper inflow and outflow of cash, any business will eventually suffer. Incidentally, inadequate access to working capital is the reason behind failure of most small business enterprises in the country and the world today.

In this post, we are sharing some tips that will help you enact financial discipline for your SME. To tip you off, these pointers explain the advantages of good accounting practices that keep your finances streamlined and readily available for use.

1.Practice Strict Bookkeeping: The cardinal rule for running a successful business is to keep accurate records of all the transactions happening on a day-to-day basis. Financial records give you an accurate picture of your income and expenditure, debts, and, accounts receivables. Which in turn help you in tracking income, paying liabilities, and filing tax returns on time.

2. Deploy Integrated Accounting Systems: The reach of technology is extending every day and a small business owner will do well to embrace a modern accounting system to integrate his/her small business with the digital economy. Accounting software are in use by most large scale businesses toady and their benefits are time tested. As a small business owner you can also utilise these systems to save accounting costs, improve financial accuracy, and reduce the chances of theft and fraud.

3. Track your Invoices: Getting paid for the work you have done is all that matters at the end of each day as a small business owner. If you are not getting paid on time, your employees are not getting paid on time, your equipment is not being serviced on time, your rental and utility bills are not paid on time and so on and so forth. Therefore, it is important to have an active invoice tracking system in place. Moreover, generate your invoices as soon as your product or service is delivered instead of waiting till the end of month, this will speed up your invoice clearances significantly and give your working capital a boost.

4. Follow Generally Accepted Accounting Principles: GAAP are accounting techniques that are pursued by leading accounting and auditing firms and are accepted as a standard procedure in the financial world. By following these principles on reporting and disclosure of financial statements you will not only be able to draw quicker financial decisions but will also instil confidence in a lender or investor for raising funds.

5. Use Small Ticket Finance for Working Capital: As enumerated at the beginning of this post, having enough money to run daily business is one of the primary concerns of a small business owner. It is quite possible that your business will run into temporary working capital difficulties at the beginning. In such scenarios, never dip your hands into the capital earmarked for equipment or assets to use as working capital. This a vicious cycle which may never end and cause your business to lose precious competitive edge as you fail to invest in proper assets because you used up that capital as working capital. Instead, apply for a working capital loan to finance your short term needs. There are many fintech firms like Lendingkart who offer working capital loans at low-interest rates in India. These business loans are short-term, typically one year in duration, and have flexible EMI options to make repayment easier.

In conclusion, financial discipline is necessary if you want your small business to be profitable. The online world offers a lot of tools that you can utilise to bring in transparency and accountability for your small business. Furthermore, online financing options have made it way easier to get working capital loans for small business and you should utilise these opportunities pro-actively for sustained success in your venture.

To know how to apply for a small business loan from Lendingkart, click here.

Aadhaar Card & Business Loan – Apply Online | How They are Connected

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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 31 March 2018 for an indefinite period. But the linking is still mandatory and comes with its own benefits.

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