MSME Loans Within 59 Minutes: is it really possible?

The government announced a new scheme for small and medium business owners as a festive gift, ‘business loans within 59 minutes. The announcement had the business world buzzing with excitement as the scheme promises business loans up to `1 Crore. However, little else was clear about the due process to be followed for getting these quick business loans. In this post, we analyze the feasibility of the latest scheme and the hurdles one might face during the loan approval process. Furthermore, we will also have a look at other government initiatives for funding MSMEs and startups, and compare their performance to NBFC loans in India.

Details of the ‘59 Minutes Loan’

The loan being offered under the government scheme is mainly a working capital loan of ₹ 10 lakh up to 1 Crore. The minimum business loan rate of interest offered is 8% but it may vary based on the applicant’s credit score, business activities and other factors that determine the financial health of an MSME. There are no collateral requirements for this loan, hence making it an unsecured business loan – similar to the working capital loans offered by NBFCs like Lendingkart. Processing fees and charges are pegged at ₹ 1000 plus applicable taxes for borrowers who are accepted for lending.

Now, coming to the main highlight of the ‘59 Minutes Loan’ scheme. Participating banks offering products under the scheme are required to provide approval in principle to the borrowers whose proposal matches their product. While this approval will be given within 59 minutes, the actual disbursal of the loan will still take 7-8 working days.

Documentation required for the ‘59 Minutes Loan’

  • Last 6-month bank statement in PDF format for all business-related accounts.
  • e-KYC paper i.e. a digital version of know your customer paper.
  • Income tax returns for the last 3 years in XML format including income tax codes and e-filing details.
  • GST certification is necessary and the borrower has to provide his / her GST ID and password.
  • Ownership certificates / details of current ventures of the applicant.
  • Personal and educational details of the applicant.

The application process for ‘59 Minutes Loan’

The application starts with a ‘new user’ registration on the official website, www.psbloansin59minutes.com.

  • Step 1: Complete the sign-up process by entering your name, email and mobile number. Click on ‘get OTP’ to verify your credentials.
  • Step 2: Enter the OTP received on your phone and agree to the terms and conditions before clicking on ‘Proceed’.
  • Step 3: The next screen will ask a few basic questions which you need to answer in ‘yes’ or ‘no’ by selecting the corresponding radio selection box. Click proceed again to continue to the next step.
  • Step 4: Now, you will be asked to input your GST details, such as GST number and password, followed by income tax information. Here, you can either upload the statements in XML format or login with your ITR details such as PAN and date of incorporation.
  • Step 5: This step involves the upload of your past 6-month bank statements in PDF format. You can also login with your net banking credentials and allow the lenders to access the financial statements.
  • Step 6: Here, you provide the details of directors, proprietor and company address.
  • Step 7: Now select the purpose of your loan and provide the details of any previous / existing loans taken by your business.
  • Step 8: Select the bank through which you want your loan to be processed. The interest amount may vary from bank to bank.
  • Step 9: Pay the ₹ 1000 convenience fee, plus taxes for approval.
  • Step 10: Download your approval letter, pending further due diligence by the loan providing bank.

Potential pitfalls to be faced by the ‘59 Minutes Loan’ scheme

The thing to note here is that the ‘59 Minute Loan’ scheme is not the first initiative by the current government to ease business finance. A similar fast track business loan scheme called the Pradhan Mantri Mudra Yojna (PMMY) is already in place. The PMMY is also backed by the public sector banks and offers loans up to ₹ 10 lakh to MSMEs and startups. However, a closer analysis of the scheme reveals some major bottlenecks and drawbacks of government run financial schemes for small businesses in India.

For example, since the Mudra program was started in 2015-2016, a whopping ₹ 4.68 lakh crore have been disbursed to 9.9 crore loan applicants. While the sum of loans given is impressive, simple math tells us that the average amount per application is just ₹ 47,249. So, the question that needs asking is, can anyone setup a successful enterprise with less than ₹ 50,000?

While someone may be able to setup a shop or similar retail business for that amount, keeping it up and running is not possible without some minimum working capital expenditure. Thus, the amount of money offered under the Mudra program is not sufficient for startups and MSME funding at all.

Moreover, the CBI is already investigating a senior Punjab National Bank Official for fraud after his PNB branch approved ₹ 62 lakh in lieu of 26 loan applications under the Mudra program. The charges as quoted in the CBI complaint are “without conducting meaningful pre-inspection or physical verification of spot of business or residence and without ascertaining end use of the loan amount or creation of assets from the loan amount”.

Now, isn’t that the Mudra program? The PMMY was meant for offering quick business loans without collateral requirements and stringent check and balances. Which in turn makes the ‘59 Minutes Loan’ scheme susceptible to unforeseen hindrances. Since the new scheme offers unsecured business loans up to ₹ 1 crore, bank officials are going to be even more cautious in scrutinizing loan applications. Also, similar to the Mudra scheme which was a refinancing scheme, for which the funds were provided by banks, NBFCs and MFIs under pressure from the government, the new scheme also adds the burden of funding loans on public sector banks (PSBs). Thus, given the NPA crisis faced by almost all PSBs, the 7-8 days loan disbursal policy also seems a little far-fetched right now.

Comparing the ‘59 Minutes Loan’ scheme with NBFC loans

The concept of fast business loans is not a new one and the latest government scheme is just an extension of same-day loan approvals being given by NBFCs like Lendingkart, albeit with some sugar-coating. Some of the features being touted by the new loan scheme, such as online portal for loan application and digital submission and verification of documents, are already in use by NBFCs like Lendingkart. Moreover, the simplicity and steps involved in loan application process are also fewer for NBFC business loans.

Here are some of the key differences between the ‘59 Minutes Loan’ scheme and NBFC business loans.

  • Application Process: Both use online application process, needing users to register with name, email and phone numbers.
  • Documentation: The government’s business loan scheme requires the submission of 6-month bank statement, 3-year income tax filings, GST details (including your password) and incorporation certificates along with personal, educational and financial details of the owner / partners / directors. On the other hand, Lendingkart offers loans based on 6-month bank statements and 2-year ITR returns if your revenue is less than 60 lakhs. It is not mandatory to have net banking and Lendingkart does not ask for ITR and GST in case of Green Zone.
  • Loan Amount: The ‘59 Minutes Loan’ scheme offers loans from ₹ 10 lakh up to ₹ 1 crore whereas Lendingkart has a wider scope in terms of funding with business loans ranging between ₹ 50,000 to ₹ 1 crore.
  • Loan Disbursal: If all details check out, the government’s loan scheme offers business loans within 7-8 days, which is not a lot quicker than the existing loan products offered by banks. On the other hand, Lendingkart promises the disbursal of loan funds within 3-days’ time once your application is verified.
  • Additional Features: Both, the government’s MSME loan scheme and NBFC loans are unsecured business loans. However, Lendingkart offers several additional advantages such as top-up loan, renewal upon full repayment, zero evaluation charges and no pre-closure charges. Furthermore, Lendingkart also has a dedicated mobile app, customer support and social media presence to assist customers in real-time.
Particulars NBFC Loans 59 Minutes Loan Difference
Time for Approval Same Day Approvals Within 59 Minutes Same concept
Time for Disbursal Within 3 Days 8-10 Days NBFC loans are faster by almost a week
Loan Amount ₹ 50,000 to ₹ 1 Crore ₹ 10 Lakhs to ₹ 1 Crore NBFC loans have a wider window that increases the possibility of getting a business loan
Documentation Minimal Documentation Personal, Educational and Financial documentation required NBFC business loans are easier to get
Process FinTech process Bureaucratic process NBFCs use IoT technologies to minimise delays in loan disbursals
Funding Self-funded Available from selected public sector banks NBFCs have ready cash available for disbursals whereas PSBs are already burdened by an NPA crisis
Flexible EMIs Yes As per bank rules NBFC loans come with bi-weekly and monthly EMI options for faster and easier repayment
Prepayment Policy No Charges As per bank rules NBFC loans offer hassle-free early repayment in full
Auto-renewal Available Not available NBFC business loans offer better revolving credit facility than bank loans


Advantages of NBFC business loans

In its current form, the new scheme by government is a tough sell once you go beyond the face value. Here are some of the things which an NBFC business loan still does better than the ‘59 Minutes Loan’ scheme.

  • NBFC loans are self-funded whereas the government’s scheme relies on SIDBI and PSU banks – State Bank of India, Bank of Baroda, Punjab National Bank, Vijaya Bank and Indian Bank. Hence, the NBFC business loans retain the advantage of being fast and free from bureaucratic delays.
  • The starting value of ₹ 50,000 gives NBFC business loans another advantage as it increases the probability of getting a small business loan for an applicant who may not be able to service a loan worth ₹ 10 lakh, which is the minimum under the government’s proposal.
  • In essence, the 59 minutes loan approval time is similar to same day loan approvals, as the condition of ‘pending verification’ applies in both cases. However, where NBFC business loans from Lendingkart are disbursed within 3 days of verification, the same process takes 7-8 working days under the government scheme.
  • NBFC loans offer the facility of revolving capital through products like business loan renewal and zero pre-payment charges, making them more suited for working capital finance. On the other hand, fresh loans under the government scheme will have to follow the same application, approval, processing and disbursal cycle all over again.
  • NBFCs like Lendingkart also offer monthly and bi-weekly EMIs to help businesses with extended invoicing cycles. This flexible EMI feature may not be a part of the government’s MSME finance scheme from the onset.
  • The questionable success of previous government financing schemes also puts NBFC loans in perspective, where companies like Lendingkart Finance are now offering business loans across India.

Concluding thoughts

While we should laud the government’s efforts to make India more business-friendly, only time and numbers will tell the real story here. The political detractors of the government were quick to point out that the new MSME finance scheme has all the trappings of a same-day approval loan and that it is merely a pre-poll sop. Even several bankers have questioned the feasibility of the ‘approval within 59 minutes’ approach as the public sector banks which are expected to shoulder the burden are still reeling from a bad loan crisis and the shadow effects of demonetization. The most concerning part of the scheme remain the actual turnaround time for the business loan. The disbursal time of 7-8 working days can easily stretch up to 8-12 days when you count weekend holidays and public holidays. So, in reality, getting a business loan from the bank will still remain a cumbersome task.

On the other hand, NBFCs are offering a wider range of loan options and complementary products and services like auto-renewals and zero penalty pre-closures, which are hard to ignore. Add to that the possibility of getting a business loan within 72 hours and the government’s proposal loses some of its sheen. So, when compared head on, NBFCs like Lendingkart are still offering better value to their customers until the time the government scheme matures.

So, in the end, answering the question ‘is it really possible to get a business loan within 59 minutes?’. Unfortunately, the answer is no. You can get a business loan approval within 59 minutes, but all it means is that the banks refinancing the government’s scheme will follow their usual application and verification process after that. The actual loan will only be given after the process is complete, which can take up to 12 days. You can, however, get a business loan within 3-days by signing-up on Lendingkart’s website or mobile app.

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

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

What is the role of a guarantor?

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

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

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

How to safeguard your wife’s assets in advance?

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

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

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

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

Avoiding the hassles of a business loan from banks

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

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

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

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

Concluding thoughts

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

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

Warning Signs That State Your Business Is in Big Trouble

Most of the times, businesses that go into insolvency are taken by surprise on the suddenness of the event. It happens because most small and medium businesses are focused on day-to-day operations and fail to realize that there is something wrong with the larger picture. So, when the hammer finally falls, everyone is surprised and of course devastated by the blow.

While all business owners face challenges at one stage or another in their career, there are some telltale signs that can alert you about big financial troubles. Recognizing these signs also allows them to take corrective actions in time to salvage the situation. In this post, we are sharing the six things that can be a warning that your business might be in trouble.

  1. Difficulties in raising a new business loan: One of the very first indicator of upcoming financial trouble is the failure to secure a loan or fresh round of financing. If your latest business loan application has taken way too long in processing and eventually gets denied, it is time for some introspection at your SME. Lenders have pretty stringent due diligence processes and may be able to see the problems which you might have overlooked. Sometimes a lender, such as a bank, may tell you that everything is fine and to apply for a business loan again after a while. This happens because the lender does not want to push away a potential customer in hopes that you may be able to sort out the business troubles and will then apply for a fresh loan. So, never take such verbal communication for granted as it is still not a firm commitment.
  2. Lack of investors or buyers for your company: If you have been trying to sell your business through equity or direct buyouts and fail to find potential buyers, again it is a sign of troubles in your financial and operational situation. Just like financing, potential buyers also have stringent due diligence and value a business based on parameters which may not match with your internal estimations. Furthermore, sometimes a business owner in search for a buyer ends up neglecting the running of the business in the short-term. Which can significantly damage the immediate prospects of a sale and also brings down the value of the business.
  3. Frequently missing major milestones: As mentioned earlier in the article, every business has its problems and hiccups at some point, but if problems have become a norm at your establishment, it is time for checks and balances. Taking a look at the last one or two years of operations and doing a fair analysis of where you should be versus where you are may help in identifying problems in sales, product development, supply chain, working capital finance, etc. Whatever it may be, you must come up with a steady plan to overcome the problem because investors, lenders and buyers are seldom interested in excuses.
  4. Discord at the top-tier of management: The C-suite as it is generally called, is the top rung of your establishment. It is here where all the planning and overseeing happens. Sometimes, discord amongst the C-suite employees or surprise departures may also be a sign of things not going well at the company. Someone might have figured out that all is not well and has simply abandoned the ship as it begins to sink. So, whenever you lose a high-ranking employee do not just get into hiring mode, look for the reasons behind the exit as well.
  5. Accounts payable are way above normal: Accounts payables are one of the best ways to determine your company’s financial and operational health. Your accounts payable let you know about the state of your cash flow. If they keep stacking up, it means you are not generating enough inflow to be able to pay-off the debts, which is never a good sign.
  6. Very short operational runway: Lastly, most companies overestimate the time that they have got to sort out things. If your operational runway has less than six months remaining, it is a huge red flag and might even be a point of no return for your business. Having six months of cash runway is the minimum you need to get things to work again, if the cash stock falls below that, it is time to weigh your options seriously.

Moving quickly to resolve a financial crisis

If your business displays any of these warning signs, moving as quickly as possible towards a backup strategy should become your focus. If the problems are in operations or supply chain, it is time to give your teams a rap on the knuckles. Streamline your operations by cutting down manufacturing, downsizing or hiring experts. If the problems are with financing and you are having trouble raising fresh finance from the banking system, perhaps it is time to look at the ways of alternate finance for small and medium businesses available in the market.

For example, FinTech lenders like Lendingkart Finance offer short-term business loans to help businesses in managing their working capital. By applying for a working capital loan for your business you will be able to free up the cash at bank for capital investment and restructuring of your enterprise. Hence, taking correctional measures and day-to-day operations can go on simultaneously. So, consider taking a business loan from non-banking financial companies if your regular lenders are showing reluctance. Non-banking financial companies like Lendingkart also offer several other benefits like lower interest rates, flexible EMIs, zero-prepayment charges, and instant loan renewals that will help you get back on your feet.

So, do not wait before it is too late, if your business is showing the signs of trouble, take corrective steps now.

Indian Government Reduces the Tax Burden on SMEs

Indian economy has stayed robust for the past few years. Global credit rating agencies continue to display confidence in the Indian economy and the government is also optimistic about meeting its fiscal targets. This in turn has prompted the government into taking on some bold reforms to the Indian economic system in the past. In yet another move, the government has announced through the Ministry of Finance that it is lowering the rate of deemed profits under the presumptive scheme for businesses.

This is good news for small and medium enterprises operating in manufacturing, wholesale, retail and trading. Earlier, when a business opted for the presumptive scheme of taxation under section 44AD, 8% of its total turnover or gross receipts was taken as net income chargeable under tax. However, the government has announced a new incentive for businesses wherein they can reduce this tax rate to 6%.

How you can reduce the tax on your business income under the new scheme?

Well, going digital and creating a low cash environment is one of the government’s primary economic objectives. The new scheme is an incentive for small and medium businesses who conduct their business transactions through electronic mediums. A statement by the finance minister also reflected this sentiment as he noted that small businesses can save up to 30% in taxes by availing this scheme and going cashless.

To take the benefit of the scheme the precondition for traders and businesses is that all their payments should be through digital means. Hence, the deemed profit rate shall be reduced from 8% to 6% for those who satisfy the pre-condition.

Who can benefit from the scheme?

SMEs which have already moved to digital transactions will benefit the most from this scheme. The tax rebates are being given with a retrospective effect. So, if your business has been accepting payments through digital transactions since 1st April 2016, you can claim tax benefits under the scheme up to 31st March 2017.

Consequently, if you have missed that opportunity, there is still a silver lining for your business, as you can benefit from the scheme by moving your future transactions through electronic modes. One caveat of the scheme is that all transactions done through cash are still liable for taxation at 8% under the deemed profit presumptive taxation scheme.

The following table shows how a business can save taxes under the new scheme.

Particulars

100% Digital 100% Cash 50% Cash, 50% Digital

Gross Turnover

₹ 1 Crore ₹ 1 Crore

₹ 1 Crore

Digital Turnover

₹ 1 Crore Nil

₹ 50 Lakhs

Cash Turnover Nil ₹ 1 Crore

₹ 50 Lakhs

Deemed Profit @6%

₹ 6 Lakhs NA

₹ 3 Lakhs

Deemed Profit @8%

NA ₹ 8 Lakhs

₹ 4 Lakhs

Total Profit

₹ 6 Lakhs ₹ 8 Lakhs

₹ 7 Lakhs

Deductions u/s 80C

₹ 1.5 Lakhs ₹ 1.5 Lakhs

₹ 1.5 Lakhs

Taxable Income

₹ 4.5 Lakhs ₹ 6.5 Lakhs

₹ 5.5 Lakhs

Tax Payable

₹ 15,452 ₹ 56,650

₹ 36,048

Tax Savings ₹ 41,198 Nil

₹ 20,596

So, by going the digital route, a small business owner can save as much as 72% in taxes through the new presumptive tax scheme. Such a margin can be a huge relief for small business owners and Kirana shop owners who operate at very thin profit margins. A legislative amendment in this regard was carried out through the Finance Bill, 2017.

Additional benefits of the scheme

Since this scheme is aimed at bringing more transparency to the organised and unorganised small and medium business sectors, there are several other financial benefits for SMEs as well.

Raising Capital through Investment will become easier for small business owners as the profit margins improve. An investor will be more willing to put his money in a business with healthy profit margins and support from the government of the day.

Getting Unsecured Business Loans through banks and NBFCs is also supposed to get easier for SME owners with an increase in their profits. However, here non-banking financial companies are positioned better than the banks. Traditional banks in India are simply too slow for the digital initiatives whereas NBFCs like Lendingkart Finance have already embraced digital finance, here’s how.

  • Lendingkart offers business loans online through their website and mobile app.
  • From application and document uploads to tracking, approvals and funds transfer, everything is done online.
  • An SME can get a business loan within 3 days’ time.
  • Digital financing allows Lendingkart to offer lower interest rates on business loans, reduce processing charges and waive off prepayment penalties.
  • Instant refinance available upon closing an existing loan.

Raising credit rating is another side benefit of the new scheme as more profits means less credit liabilities and subsequently a healthier balance sheet. This will raise a business’s credit score and help secure more financial resources for growth and expansion.

In conclusion

All in all, the new scheme is a very good incentive from the government and shows the ruling dispensation’s eagerness for market reforms. Small and medium business owners are set to gain from this scheme both in short-term and long-term. It would be good if the government can extend the benefits of these schemes to professionals taking the benefits of the presumptive tax scheme. However, one step at a time does the trick and we applaud the finance ministry’s proactive approach to business development in India. Moreover, the financial benefits of the scheme such as easy small business loans and growth in investment prospects are definitely positive steps for the economy and the people.

Best Small Business Practices to Adopt in a New Financial Year

A small business owner is always striving to give his/her business the right environment to thrive. Here, 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.

 

    1. 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.

 

    1. 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.

 

    1. 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.

 

  1. 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 a 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.

Best Free Accounting Software for Small Businesses in India

Did you know that you can save a lot of time and money by adhering to smart accounting? Most small business owners do not always prioritize accounting, as there are other tasks on their to-do list which seem more urgent. However, there is a reason behind accounting being a separate arm of business management, accounting enables efficiency and transparency in business operations.

Nowadays, the integration of IT solutions with business operations means that a small business owner can easily manage cash flow, invoicing and payrolls with automated accounting software.

Here we are sharing a list of best free accounting software for small businesses that you can test and deploy for your enterprise.

ZipBooks

A popular choice among small business owners, ZipBooks simplifies accounting with an easy-to-learn interface and some powerful accounting features. The ZipBooks starter option is free and lets you create unlimited invoices for any number of vendors and customers. You can also connect your bank account to the software and manage your business’s bank account.

Marg

Developed specifically for use in India, the Marg Accounting Software is totally free to use and offers a comprehensive list of accounting features such as ledger management, cash flow control and preparing detailed balance sheets. The software also integrates various forms required by Indian Business Law for e-filing of tax returns online.

Tally ERP 9

Tally remains the most popular accounting software in India. It has a free version which you can utilise to manage accounts and keep track of your finances. There are many institutions offering Tally courses in India, so using this software also gives you ready human capital to invest in.

Profitbooks

It us a cloud based accounting software which can be accessed from any device anytime. The free version of Profitbooks allows bookkeeping and invoicing to give you accurate accounting information. You can also connect to the Profitbooks Live Chat to learn about its advance features.

GnuCash

This is an open-source personal and financial accounting software. Open-source softwares are community managed, hence they receive updates more frequently and a large community of devs means new features are available more frequently and bugs are removed quickly. However, open-source software may sometimes (although it’s rare) crash and cause data loss. The GnuCash is free and available for Linux, Mac OS X and Microsoft Windows.

So that completes our list for free-accounting software for small businesses in India. You can manage your finances and keep your working capital in check by switching to prudent accounting management with this software. Speaking of working capital, if you are having hard time maintaining the daily cash flow, consider getting a short term business loan. To know more about fast business loans in India, visit us at lendingkart.com

Managing Your Working Capital can be the Key to Business Success

Working capital management allows you to keep your company’s financial fundamentals in check and leads the way for operational success. Effective working capital management is the hallmark of every successful business venture as it represents a synergy between the business goals, profitability and liquidity of the business.

As you know, working capital is the difference between the current assets and current liabilities of a business, and is utilized for running day to day business activities. Thus, working capital essentially represents the efficiency of your company’s operations and its financial stability in the short-run. If you don’t have enough working capital to cover your short-term debts and expenses, then your business may face operational or even existential trouble in near future.

 

Here are some pointers to further emphasis the need for having adequate working capital in your kitty.

 

  • A business requires a bare minimum of cash-flow to maintain itself on daily basis. These cash requirements are fulfilled by working capital.
  • Working capital is the key for debt and inventory management. If you cannot secure the inventory your customers are looking for then your business operations will suffer. Adequate working capital balance allows you to make emergency purchase of stock and services to keep your clients happy.
  • Working capital may play and important role in your financial dealings such as applying for small business loans, mergers and partnerships.
  • Not having enough working capital can ultimately lead to insolvency as your business will not be able to meet its debt obligations.

 

How to Manage Working Capital?

 

Working capital management is an accounting strategy. By making some financially prudent decisions, you can ensure that the balance between your assets and liabilities is maintained and you still have enough ready cash to fulfill your daily commitments. Here are some of the things you can do to effectively manage your working capital.

  • Manage your inventory. When you are selling physical goods, a simple inventory management technique i.e. to balance your demand and supply can help you save more cash. Needless to say, this cash then becomes a part of your working capital.
  • Prudent accounting can also ensure that you never run out of working capital resources. Once again keep a track of accounts payables and accounts receivables to keep your books up-to-date. Lagging behind in collections and payments often causes problems later on.
  • Do a monthly analysis of your inventory turnover ratio and bill collection ratio to optimise your business operations and establish a cycle. This will help you in anticipating the expenses in advance and allow you to keep cash at hand when the need arises.
  • Apply for a working capital loan. A short-term business loan is the easiest way to get ready cash for day to day operations. A working capital finance frees-up your capital for investment in equipment and site while you repay the loan amount in flexible monthly installments.

 

Lendingkart Small Business Loans

 

The thing that matters most when you apply for a business loan is the time it takes for processing and disbursement. Bank loans are cumbersome due to their inherently lengthy application, verification and disbursement processes. That’s why Lendingkart has kept the process quite simple by making it completely online.

You no longer have to Google all day about ‘how to apply for a small business online’. Simply create a Lendingkart account, fill in your loan requirements, and let us know about your business.

Once that is done, we will offer you a loan quote, choose to accept it and upload the documents for online verification. If all things check out, you can get a small business loan within 72 hours of application.

Ready to apply for a business loan with Lendingkart? Click here to proceed.

Working Capital Financing to Make Your Business Agile

Working capital keeps your business upright when you hit a snag or when the market is not performing as expected. In simple terms, working capital is the cash you need to carry on day-to-day business tasks. It is also calculated by subtracting your current liabilities from your current assets. Falling short on working capital can lead to a loss of flexibility in operations, ultimately leading to reduced credibility with financiers, vendors and customers.

Working capital floating just above the red line is also bad for your enterprise, especially if you own a small business. Because when you are barely managing to survive in the market, you will not be able to take advantage of new business opportunities to expand and grow your company.

However, always keeping sufficient working capital at hand is easier said than done. Small businesses are generally cash-strapped and depend on timely sales and payment of invoices for their working capital. Here, having a clearly defined credit policy can help you out. It will also give you an idea of the customer credit you can afford without draining your working capital.

In this post, we are sharing a few of such simple yet effective measures you can take to keep your small business agile and competitive.

Fast Track your Payment Collections

The best way to keep your working capital funds ready and steady is to ensure that you are collecting your payments the moment they are cleared. Don’t wait till the end of the month to bill your clients, generate your invoices as soon as the goods or services delivery is confirmed. Billing early also ensures early clearance and hence an early top-up of your working capital.

Never Finance Fixed Assets using Working Capital

If you have used up all your cash then your business will look riskier to financial institutions and potential business partners. Financing fixed assets such as equipment with working capital also reduces your daily, weekly or monthly spending threshold. So, instead of depleting your working capital, use long-term loans to pay for financing fixed assets.

Using Asset Refinancing to Generate Working Capital

Asset refinance helps your cash flow by releasing cash against the value of an asset that you already own. You can sell the asset at its current value to a leasing company, which will then lease it back to you for a specific period of time in exchange for rental payments. Furthermore, fixed asset refinancing will also protect your business from asset depreciation.

Apply for a Working Capital Loan

An unsecured working capital loan for small businesses can ease your working capital worries. The logic is simple, to gain profits and business growth you will need to invest more in your small business. A working capital loan for small business allows you to afford the inventory required by your potential clients, thus, helping you turn them into real account receivables.

Working capital loans are also quite easy to secure if your business has a veritable track record. You can even get a working capital loan approval in less than 24 hours and funds transfer within 3 days with certain financial. If you are wondering where can I get a business loan that fast, visit www.lendingkart.com to apply for a business loan.

Lendingkart has an ‘online only’ loan application process and provides small business loans up to ₹1 crore.

Grow Your Business with Quick Small Business Loans

Every business follows a different approach towards loans and institutional finance. As an independent business owner you may or may not have borrowed money in the past to achieve your business goals. If you have not taken a business loan in the past, it is but natural to be a little averse to taking up a liability, however, sometimes a loan is a risk worth taking.

By utilising the loan funds for the right reasons, at the right time, you can give your business a veritable boost. Here are a few reasons for taking a business loan that you should consider

Expanding your facility or getting a second site: If your business has been growing year on year, expansion is a logical step to consider. You can utilise business loan funds for restructuring and expanding the original site or expand your venture to a second or even third site.
Improving your credit ranking: Borrowing loans and timely repaying them opens the path for larger institutional finance in the future. As good repayment record will have a positive effect on your credit rating, establishing you as a bona fide borrower. This in-turn will allow larger borrowings two or three years down the line, when your business needs another round of funding.
Buying specialised tools and equipment: If you already have ample space at the existing site, then you can also consider using the funds from your business loan for purchasing new stock or equipment. Sometimes using latest technology for production and management of your business can result in huge cost savings.
Taking advantage of a golden opportunity: Well a good opportunity seldom knocks twice, so if an amazing idea or opportunity comes your way which requires fast funds, a business loan can help you capitalise on it.
Hiring and talent acquisition: Every successful business needs talented hands and business owners agree unanimously on the fact that their people are the greatest business assets for them. So, don’t lose your best employees for the want of funds. Business loans also allow you to hire new talent and expand your enterprise.
Loans for working capital management: A business can still sustain itself in face of a temporary lack of profits but lack of working capital may force you to pull down the shutters. Cover the shortfall in your working capital with an unsecured business loan to get out of temporary sticky situations.

Where can you apply for unsecured small business loans?

Small businesses often turn to banks for unsecured business loans. But banks have a slow and bureaucratic system for application, verification and approval of small business loans. It may take as many as 20 days for a bank to process and approve your business loan application.

An alternative is provided by new lending products like Lendingkart for business loans in India. A business loan application with Lendingkart can get approved within 24 hours if all your documents and financial details are in order, giving you immediate access to the funds you need.

Furthermore, the application process is completely online which Lendingkart is able to save money on manual labour and in turn transfers the benefits to customers in the form of low interest rate on small business loans. As a borrower, it is a win-win for you.

The best thing about getting a business loan from Lendingkart

Lendingkart offers unsecured business loans.

When you take a loan from a bank, it is a secured business loan, which means you have to give the bank an asset of equal or more value as a collateral. In case you are unable to repay the loan timely, the bank can take over the asset and recover its costs.

An unsecured business loan doesn’t require any collateral, which is what Lendingkart offers. Thus, your capital is not at risk when you take a business loan from Lendingkart.

You can now apply for a business loan from the Lendingkart smartphone app. To know more and apply for Lendingkart business loans, click here.

Difference between Working Capital and Startup Loans

Online Lenders – The Better Choice

Small businesses are increasingly moving towards online business loans and finance options for expanding their operations. Online lenders offer several benefits over financing from commercial banks, such as Flexi EMIs and quick short-ticket finance. This has made these non-banking financial institutions the choice of modern MSMEs.

For example, today, non-banking financial companies like Lendingkart Finance are disbursing working capital loans and unsecured business loans across the country whereas banks are limiting their commercial lending activities.

Here are the reasons why you should apply for a business loan from an NBFC –

Quick Turnaround Time

The one element that defines importance of finance is its timely availability. If you fail to get the requisite funds within the time frame available to you, either the opportunity will be lost or the same activity will cost you more.

Since a majority of small business owners are applying with them, banks take their own time in scrutinizing business loan applications. Thus, the process of loan approvals is slow. NBFCs, on the other hand, specifically cater to the MSME finance. Therefore, they are prompt in completing documentation, verification and disbursals.

E.g., Lendingkart Finance promises loan amount disbursal within 72 hours of documentation.

Completely Online Process

The reason why an NBFC like Lendingkart can approve loans faster is the online only loan application process of the company.

Every modern business has access to digital copies of requisite loan verification documents such as PAN, Aadhar Card, Bank Statements and ITR Certifications. An online lender can thus quickly verify the statutory status of your enterprise and disburse loans where traditional banks continue to struggle with filing and manual paperwork.

Minimal Documentation Required

In an online process, the lender can verify your business and personal information through government’s online portals, hence there is no need for excessive paperwork and documents to be submitted. For example, Lendingkart offers business loans by verifying only the essential documents for identity, address, incorporation and tax compliance of your enterprise.

Flexible Payments and More

The completely online business loan process allows lenders to cut costs associated with manual work, and they are more than happy to pass you the benefits. So, expect lower business loan interest rates, flexible EMI options and reduced processing charges when you get a business loan from an online lender like Lendingkart Finance.

If you are planning a business expansion soon or want to streamline your daily operations with a working capital loan, visit our website; www.lendingkart.com, and sign up for a quick quote.