How an Unsecured Business Loan is the Safest Bet for Growing Your Business?

When you are planning to raise short-term finance, an unsecured loan can be the best way to do so. The safety offered by an unsecured small business loan is one of its primary selling points. You are not required to put up equipment or property as collateral when applying for an unsecured loan. Notwithstanding the fact that most small businesses lack adequate collateral assets, the elimination of this requirement makes these small business loans more accessible for MSMEs.

Moreover, the entry of NBFCs has further democratised the Indian small business loan market. New age lenders use the power of internet, cloud computing, big data and AI to process loan applications faster and with higher disbursement ratios than their banking counterparts. For example, applying for a business loan online with Lendingkart can get you the money in as less as 72 hours while a bank takes at least 7 days to process the same application.

Here is how a small business loan helps in your company’s growth.

Ensures operational successes

Every business relies on operational stability to earn profits. A small business loan allows you to purchase raw materials, finished goods, or other items that you need to keep in ready stock. Furthermore, you can also utilise the loan funds to pay wages and salaries, and clear immediate bills and expenses.

A small business loan also helps you in working capital management when your bills receivables get delayed or there are unexpected operational costs to be taken care of.

Safeguards your bottom-line

By offering quick and easy liquidity, small business loans give businesses a way out from the vicious debt traps practiced by unorganised moneylenders. Now you can safeguard your bottom-line more easily with MSME loan funds without having to worry about long-drawn loan approval processes from banks.

Dynamic ticket size

An unsecured business loan is not given against a collateral, therefore its value is not tied to the value of a fixed asset. You can get an unsecured loan starting from Rs. 1 lakh and go all the way up to Rs. 1 Crore to fit your business requirements.

Flexible Repayment

Small business loans from FinTech lenders comes with another plus i.e. the option to pay EMIs on fortnightly or monthly basis as per the loan agreements. So, not only can you get the loan funds quickly but you can also repay them faster to get another loan approved. For example, Lendingkart approves and disburses the paid-up loan amount without further processing charges or additional document requirements.

Multi-purpose usage

An unsecured business loan is a short-term business loan, thus, lenders do not impose any restrictions on its usage. You can use the loan funds for any number of business activities which makes them excellent for boosting your working capital, business investment and marketing activities.

Now, after reading the benefits, the question you must be asking is that;

What if you default on an unsecured business loan?

Well, defaulting on the loan can ruin your credit score for starters. And, you might not get loan future loan approvals due to the bad credit history. Which in turn will make the loan repayment even more difficult. The lender may also file a lawsuit if all negotiations for repayment fail.

However, in most cases the lenders will consider a revised repayment plan if you let them know of your financial difficulties in advance.

Wondering where to apply for a business loan online? Click here to visit us at Lendingkart and start your first online business loan application.

5 Clever Small Business Financing Options in India

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

 

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

 

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

 

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

 

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

 

Angel Investors 

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

 

Crowdfunding

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

 

Lending Institutions

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

 

Bootstrapping

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

 

Venture Capitalists

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

Why Dual GST and How it will affect your Business?

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

What is GST?

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

What is Dual GST?

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

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

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

Impact of GST on your pricing

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

Effects of GST on your SME:

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

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

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

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

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

Who should register for GST?

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

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

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

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

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