The Role of Textile Sector and How to get loan for textile business

Did you know? India has one of the oldest textile industries in the world. Throughout the course of world history, Indian textiles have remained a fascination in the middle-eastern and western societies. Today, textiles exports contribute almost 11 per cent to the total export by the country and the textiles industry provides employment for millions. Approximately, there are 40 million workers in the textiles industry and another 60 million who are indirectly associated with it.

The textile industry in India has a couple of broad segments. The first is the unorganized segment which includes handloom, handicraft and sericulture. These are operated at smaller levels and often manufactured through traditional tools and methods. Then there is the larger organized segment which includes spinning, apparel and garments manufacturing for local and international clients. Manufacturing in this segment is based on the use of modern machinery and techniques like the economies of scale.

In terms of market size, the Indian textiles industry is worth USD 108 billion, which is expected to reach USD 223 billion by 2021. Apart from providing employment to an estimated 100 million people, the industry contributes almost 5 per cent to the country’s Gross Domestic Product and 14 per cent to the Index of Industrial Production. Currently, the industry is witnessing a growth in investment and market activity. The industry has attracted Foreign Direct Investments to the tune of USD 1.85 billion between April 2000 and March 2016. The Government of India has also come up with several export promotion policies for the industry, allowing up to 100 percent FDI in the sector under the automatic rule. Also, there are plans to set up India’s first integrated textiles city in the state of Andhra Pradesh.

The path ahead for the Indian Small and Medium Enterprises in the Textiles Industry

The future looks bright for the Indian textile industry both for the large-scale and the SME section. There is a marked increase in domestic consumption and export demand also looks strong. As consumerism and disposable income of the middle-class continue to rise, more new international players are expected to enter the market. For example, Marks & Spencer, Guess, and Next have come to India within the last decade. India’s organized apparel segment is expected to grow at a Compound Annual Growth Rate of over 13 percent over a 10-year period. The SME segment, that deals mainly in handloom, handicraft and sericulture, is also benefiting from e-commerce. Several online platforms have come up in the last few years which are promoting the domestic textiles and have helped in expanding their customer reach in India and abroad.

Getting a loan for textile business

If you are a small business owner in the textile industry, you can benefit from a slew of government initiatives, such as:

  • The tie-up between the Department of Handlooms and Textiles has and nine e-commerce players and 70 retailers for increasing the reach of handlooms products. It will generate better prices and continuous business for SMEs in the textiles sector, and facilitate direct access to markets and consumers for small weavers.
  • In addition to the 5 percent interest reimbursement provided for specified technical textile machinery, the Revised Restructured Technology Upgradation Fund Scheme (RRTUFS) now covers manufacturing of major machinery for technical textiles for 5 percent interest reimbursement and 10 percent capital subsidy.
  • The Scheme for Integrated Textile Parks (SITP) provides aid to the extent of 40 percent (with a limit up to ₹ 40 crores) for the creation of infrastructure in the parks.
  • The major machinery for production of technical textiles gets a concessional customs duty of 5 percent.
  • Specified technical textile products are covered under the Focus Product Scheme. The export of these products is entitled to a duty credit scrip equivalent to 2 percent of freight on board (FOB) value.

Apart from these benefits, you can always apply for a small business loan for textile business if you need financial assistance. Nowadays, non-banking financial institutions like Lendingkart Finance are offering instant business loans to the tune of ₹ 2 crores for promising small and medium businesses. As opposed to bank loans, these RBI approved small business loans are faster and easier to obtain. Salient features of these small business loans for textile businesses include,

Features of these small business loans for textile businesses

  • Ticket size of ₹ 50,000 to ₹ 2 crores.
  • Quick turnaround time which can be as low as 3 days.
  • Online application, approval, and tracking.
  • Customized interest rates to match your credit profile.
  • Flexible repayments through monthly or bi-weekly installments.
  • Repayment period of 1 to 24 months.
  • Processing fee of 1 to 2 per cent with no other charges.
  • Zero-prepayment charges.
  • Loan renewal for the same amount upon full repayment.

As you can see, the ticket size and repayment window make these loans ideal for various business activities such as equipment purchase, restocking inventory, working capital management and business expansion. You can use a Lendingkart small business loan to perform any or all of the critical business tasks which require immediate financial attention. The loan application process is quite straightforward and takes only 15 minutes to complete. Simply log in at www.lendingkart.com or download the Lendingkart Finance app on your Android device to get started.

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

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

What is the role of a guarantor?

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

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

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

How to safeguard your wife’s assets in advance?

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

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

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

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

Avoiding the hassles of a business loan from banks

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

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

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

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

Concluding thoughts

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

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

Reasons why Unsecured Business Loans have Become Popular in India

A lack of adequate working capital can hinder the daily operations of your business, threatening both short-term and long-term growth. Seeking help from a traditional lender, like a bank or financial institution, comes at a cost. These institutions seek guarantee for their money and demand a valuable asset to be put up as collateral for the money they lend. If your business is already running a risk of going into loss, putting a valuable asset hostage is not going to help your cause, and that’s where an unsecured business loan comes into the picture.

Unsecured business loans are short-term small ticket loans which help you take care of routine expenditure, such as asset maintenance, vendor payments and raw material purchases. The best thing about these small business loans is that these loans are offered without any collateral. Apart from using these loans for working capital management, you can also utilise the loan funds for business expansion, however the small ticket size means these loans are best used for immediate expenses that help your business return profits.

Here are top reasons why small business owners in India are opting for unsecured business loans from NBFCs like Lendingkart over secured business loans from banks.

Helps overcome temporary business disruptions

A small business owner faces many challenges in today’s rapidly changing marketplace. Unsecured working capital loans give confidence to a business owner facing hard-times due to temporary disruptions in the market, take for example the two recent cases of demonetization and GST implementation. By the time these policy decisions were streamlined, they had already caused a lot of financial turmoil for small business owners. Unsecured small business loans played an important role in stabilizing the market by giving business owners access to funds for working capital.

Faster loan approval and quick disbursal of funds

A signature feature of unsecured business loans, offered by NBFCs like Lendingkart Finance, is that they are exclusively designed for the needs of small and medium sized businesses. Often, a small business owner needs quick access to funds to benefit from a new opportunity or to tackle immediate financial requirements. A traditional bank loan can take up to 10 days to get approved, hence defeating the purpose. In such cases, unsecured business loans come to the rescue with their faster approval times and quick disbursal of funds. Lendingkart offers quick business loans with disbursal time as low as 72 hours.

Flexible repayment options

A small business relies on invoice clearances to maintain its cash flow and profits. If a business gets most of its invoice payments after the first or second week of a month, it may struggle to keep up with the monthly payment schedule of a secured business loan which has due date early in the month. Unsecured loans from NBFCs like Lendingkart come with flexible EMI options, letting business owners choose an EMI schedule that is in sync with their business earnings.

Business friendly terms and conditions

Unsecured business loans come with business-friendly terms and provisions, such as low processing fees and pre-payment charges, auto-renewal of loan amount upon repayment, and no-hidden costs. Hence, making these loans attractive for small business owners looking for quick and convenient finance.

At Lendingkart Finance, we are constantly working towards providing small and medium business owners quick business loans to help them focus on growth and become profitable as soon as possible. To know more about Lendingkart business loans, visit our homepage or download the Lendingkart Instant Business Loans App from Google Play Store now.