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.

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.

Fintech Advances Are Creating New Opportunities For Micro-Businesses In India

Traditionally, small and micro-business owners face a lot of hurdles when trying to raise cash from banks and other public institutions of finance. The bureaucratic and risk averse mentality of these institutions makes borrowing money difficult for upcoming businesses even if they have their finances in order. In such cases, a small business owner usually ends up selling some assets or private property to fund business growth.

While a bank’s unwillingness to lend to a new and upcoming business is understandable in these times of financial turmoil and growing NPAs, it does hurt small businesses with potential for growth. The situation, however, has improved markedly in the last decade as non-banking financial companies have emerged as a source of alternative finance for small and medium enterprises. Nowadays, micro-businesses are also benefitting from short term, small ticket finance offered by these companies.

Also known as FinTech, the NBFCs use a mix of financial products and IoT technologies to speed up the process of business loan approvals. FinTech solutions today are benefitting a growing number of small business owners, startups and freelancers in India and the world. Here are the things that make FinTech finance a veritable alternative to getting small business loans from a bank.

Diversified Products and Services

Where banks generally have a limited number of products and services and operate on the principle of ‘one size fits all’, FinTech lenders are doing things a little differently. They are not only offering money that you can use to expand your business but also provide business consulting, foreign exchange services and have different types of business loans and services to best match your needs. Unlike traditional banks, the products and services of FinTech lenders do not focus on large corporations and rather are meant for SMEs.

FinTech products like small ticket working capital loans are helping small business owners fill the gaps in their cash inflow and outflow. This has helped small business owners in taking advantage of sudden business opportunities that come their way. A report from the World Economic Forum has lauded FinTech as the enablers of global business environment for small businesses in developing economies like India.

Unsecured Small Business Loans

FinTech lenders are the first to realize that most small business owners are unable to get loans because of the collateral requirements of traditional lenders. A person who has just started a new venture is unlikely to have high-value assets to secure a business loan, which in turn limits his ability for growth. Also, spoiled by lending to larger companies, banks often do not see any benefit in small-ticket loans and categorically deny loan applications which do not meet their policy parameters. Here, FinTech lenders have come up with the concept of small ticket, short-term unsecured business loans.

Now, small business owners can get short term business loans as per their own requirements instead of borrowing according to the lender’s perspective. For example, if a bank’s policy is to only approve business loans above Rs 5 Lakh, a small business owner with a requirement of just Rs 3 Lakh may also end up applying for a loan of Rs 5 Lakh. Which then he will have trouble repaying due to high EMIs. On the other hand, FinTech finance providers like Lendingkart are offering business loans starting from Rs 50,000 up to Rs 1 Crore for eligible loan accounts. Hence, providing flexibility and need-based financial services desired by small business owners.

Easy and Flexible Repayments

Loan amounts are not the only thing flexible about FinTech finance. Borrowing from an NBFC also gives business owners the freedom to choose their preferred EMI schedule or prepay the loan without hefty penalties. This makes renewing loan cycles easier and makes FinTech credit a type of revolving finance for working capital needs and capital expansion. On the other hand, banks usually have a fixed repayment cycle that disregards invoicing and sales cycle of a small business.

Once again, a small business is better off borrowing from FinTech lenders like Lendingkart Finance who offer bi-weekly and monthly EMI schedules. Moreover, Lendingkart completely waives off prepayment charges if you decide to settle your loan in full.

Re-borrow the Money

The advantage of FinTech finance does not end at the repayment of an existing loan. A business can re-apply for a business loan upon full payment of the existing loan and get an instant approval for the previously approved amount. This is one of the best ways to get small business loans time and again and not only helps your business growth but also contributes to a significant increase in your business credit score.

In Conclusion

There is no doubt that FinTech is one of the most transforming platforms for small business owners in the 21st century. By enabling quicker and easier credit, FinTech has provided much-warranted relief to SMEs from their age-old financing problems. FinTech has also helped cut down the informal credit market where private lenders are used to charging exorbitant interest rates (sometimes up to 36% to 48%) from unsuspecting borrowers, trapping them in vicious credit loops. The lower interest rate business loans and reasonable repayment time windows have helped many a small business owner in breaking out and earning their way to success.

Ultimately, FinTech has become an important pillar of nation building in India where 45% of the GDP contribution comes from small and medium business industries. Due to its digital nature, it is a very transparent medium of finance as well, which has helped small businesses join the mainstream and become tax compliant.

If you are looking for an Instant business loan or wish to know more about FinTech finance, visit us at www.lendingkart.com and have a look at our FAQs section. You can also contact us by dropping a mail at info@lendingkart.com. To apply for a business loan, simply check your eligibility and create a Lendingkart account to begin your loan application.

Here’s How to Secure Collateral-free Working Capital Loan up to ₹ 1 Crore

Small business loans are both hard and easy to get. If your business has a verifiable history and you adhere to the tax and policy guidelines laid by the government, then it is easy to secure a business loan. And if, your papers are out of order, then it is a little harder to get one. Still, small business owners who are careful in managing their income and expenditure, and regularly pay due tax, can also find it hard to secure institutional finance in the current economic environment.

The banking sector in India is facing an unprecedented rise in non-performing assets a.k.a. NPAs. This has put pressure on most public and private sector banks to lend prudently. While the additional measures of scrutiny are the need of the hour, they are definitely affecting the investment environment in the country. Also, since the Indian economy is the fastest growing major economy in the world at the moment, a lack of investment doesn’t bode well for small and medium enterprises which contribute over 45% to the GDP growth.

Fortunately, the alternate finance industry has taken the mantle for providing working capital finance for SMEs of India. Non-banking financial companies like Lendingkart Finance are leading traditional banks in terms of funding and nurturing SMEs. There are several benefits of FinTech finance as it is popularly known because of its reliance on Big Data and Internet of Things.

Faster Business Loans: FinTech companies like Lendingkart are offering small business loans with a minimum turnaround time of 72 hours. This has been made possible by switching to online application, documentation and verification of loan requirements. Since, the government has also emphasized digitization in its schemes and policies, it has become easier to verify most of the financial information online.

Unsecured Business Loans: NBFCs are not only offering business loans faster but are also offering them without any collateral i.e. putting an asset up as security for the loan amount. Thus, removing one of the biggest problems faced by small and medium enterprises when applying for a business loan.

Lower Interest Rates: By eliminating manual work hours in loan processing, NBFCs are saving more in terms of operational costs. The benefits of which are then passed on to the borrowers in form of lowered interest rates on small business loans. With a good credit score and healthy balance sheet you can secure a business loan at half the rate of private money lenders.

Flexible Monthly Installments: NBFC loans are also quite business friendly as they offer multiple repayment options in comparison to bank loans which have fixed EMI schedules. For example, Lendingkart Finance gives you an option to repay your business loan in bi-weekly or monthly installments. So, if you are confident of generating revenues faster, you can also repay your loan faster. Otherwise, you can opt for a more relaxed repayment plan.

Waiver of Fees and Charges: Another benefit of FinTech business loans being online is that you pay minimal processing charges. Lendingkart has a processing fee of just 2% to 4% (depending on sanctioned loan amount), which is several notches lower than that of a bank. Furthermore, NBFCs are also waving of prepayment charges / penalties if you decide to repay your loan early.

Renewable Business Loans: A huge benefit of taking a small business loan from an NBFC like Lendingkart is that you can easily renew your sanctioned loan amount upon repayment. So, it is a kind of revolving finance facility that you are getting for managing your working capital.

Credit Score Improvement: Last but not the least, NBFCs also report your transactions to the credit rating agencies, which in turn helps in raising your credit score. So, by getting a small ticket business loan from an NBFC, you are inadvertently opening the doors to larger financial investments for your SME.

Applying for a Business Loan with Lendingkart

Lendingkart is one of the leading business loan providers in India, offering short-term working capital finance up to ₹ 1 crore for SMEs. To get a business loan you simply need to follow the following steps.

Getting your Documents in Order: Before applying for a business loan with Lendingkart, make sure that you have the digital copies of following documents handy.

  • Business registration / incorporation certificate and Company PAN Card
  • Bank account statements of all business-related accounts for the past 1 year
  • Personal / partner / director identification such as Aadhar and PAN Card

Assessing your Loan Requirements: Another thing to keep in mind when applying for a business loan with Lendingkart is that you should do a realistic analysis of your financial needs. Applying for an overly ambitious loan amount may see your application rejected whereas under applying may not fulfill the purpose for which you are taking a business loan.

Improving your Credit Rating: This is a one-off step for companies with a less than ideal credit rating. We recommend that you take steps to improve your credit rating by repaying existing debt and streamlining your finances before applying for a business loan to get the maximum benefit in terms of loan amount sanction and interest rates.

Now that you are ready to apply for a business loan, head over to the Lendingkart website or download the Lendingkart app on your Android or iOS smartphone to create a free loan account. The process for application is fairly straightforward, fill in your business details, loan requirements and upload the aforementioned documents to get an instant business loan quote. The quoted loan amount can be equal to or slightly lower than the requirement you share with us. Choose to accept the loan offer and Lendingkart will start the verification process.

You can easily track your loan application status from your Lendingkart loan account online. If all things check out, Lendingkart will credit the funds to your business account within 3 days of application.

For securing a quick, collateral-free working capital loan from Lendingkart.

Facing a Temporary Cash Crunch? Get a Short-Term Business Loan

Cash crunches can occur due to unfavorable business environment, changes in government policies (e.g. demonetization and GST) or seasonal shifts in sales. However, with some prudent financial management and the help of FinTech services, you can avoid problems like shortage of working capital loan which are usually associated with a cash crunch.

Here are some ideas to help you manage your finances and get through a cash crunch with relative ease.

Streamlining your Cash Flow

A positive cash flow statement allows you to have ready money when the need arises. Positive cash flow means that the amount of money coming into your business is more than the amount that is going out. Money earned through sale of goods and services and by providing other auxiliary services accounts for the cash that is coming in, while the money you spend on manufacturing, operations, rent etc. is the cash that is going out. Striking a positive balance between the two is not very difficult if you are using data-based metrics to scale your business operations.

Another thing that will help your business in maintaining a positive cash flow is the timely management of your receivables. Most working capital cash crunches arise because of delayed payments from your customers. When you are not getting paid on time for a product or service, you have to rely on alternate finance to run day-to-day operations, which eventually becomes a vicious cycle of debt and revenue shortfalls.

Paying your dues on time is also an important factor that reflects positively or negatively on your cash flow statement. Paying your rent and utility bills, vendor invoices, taxes etc. allows you to avoid penalties and fines, thus saving precious cash resources for business use. However, if you have a habit of missing due dates then it has a negative impact on your cash flow and restricts the amount of ready cash you have.

Getting a Credit Line

A credit line allows you to get a loan from a bank up to a specific limit. However, in this case you pay interest only on the amount you have presently borrowed. For example, if your credit limit is set at ₹ 10 lakh but you have borrowed only ₹ 2 lakh at present, then you will be paying an interest on the borrowed sum only. If you choose to withdraw another ₹ 1 lakh from the bank then your interest payment shifts accordingly to the current outstanding amount i.e. ₹ 3 lakh in this case.

While credit line is a good option for seasoned businesses, there is a downside to it as well. Credit lines are usually extended by traditional banking institutions which require a lot of paperwork and hassle to get one. New and upcoming business usually finds it hard to get a credit line for managing working capital and business expansions.

Using Credit Cards

A credit card issued in the name of your business can also help you overcome a temporary cash crunch. Since, the average repayment period on a credit card is about 21 days after bill generation, you can get up to 50 days of credit by timing your credit card expenses. If you use your business credit card on the first day of the monthly billing period, it gives you enough time to get the money back through revenues and repay it in time.

However, using credit cards also has its risks. If, for some reason, you are unable to repay within the stipulated period, you may find yourself paying a lot of interest.

Apply for a Business Loan

The best way to get your finances in line is by applying for a business loan. Now, a lot of people who own small and medium businesses are wary of getting into a debt trap. But a business loan is totally different than a personal loan or taking money from a private money lender. Business loans tend to have relatively low interest rates and are optimized for a business as per its earnings and expenditure.

If you have a healthy business profile, good credit rating, a reliable supply chain and pay your taxes on time, you can get business loans online from NBFCs like Lendingkart. Online business loans allow you to avoid the bureaucratic hassles of applying for a loan with a bank. They also have a faster processing time. For example, a completed application for business loan can get approved and funded within 3 days’ time by Lendingkart. However, it does require you to have valid proofs of the requisite documents.

Additionally, NBFC loans also come with a renewal facility which lets you borrow the same amount again once you pay off the existing loan. It is better than having a credit line actually, since you also get the facility of flexible EMI payments and increased credit limits. Lendingkart Finance allows you to repay your loan in monthly or bi-weekly payments, letting you adjust your liabilities according to your invoicing cycle. Moreover, as your sales / revenue increases, Lendingkart increases your borrowing limit, giving you access to more funds for working capital management or business expansion. Furthermore, as your relationship with the company matures and your business’s credit score improves, Lendingkart can lower the interest rate on your business loan as well.

NBFCs like Lendingkart are governed by Indian laws and the RBI and come under FinTech services which are especially designed for small and medium businesses. Right now, you can borrow short-term business loans up to ₹ 2 crore from Lendingkart to grow your business.

Concluding Thoughts

Getting small business finance in India has been a difficult thing for many years. With the traditional banking system leaning towards corporate finance, small and medium business owners often resorted to private finance or utilizing their savings for business use. However, the arrival of Internet of Things, e-commerce, business software and FinTech lending platforms like Lendingkart has made it easier for them to get quick finance with favorable interest rates and repayment terms. These services also help businesses in avoiding the risk associated with credit card finance and private lending, while making them more efficient in working capital management through cash flow control and FinTech lending services.

Tips to Increase Your Small or Medium Business’s Credit Score

Poor credit rating is one of the foremost reasons for rejected business loan applications. In recent years, main stream banking sector has become increasingly wary of lending to small and medium businesses. A major factor behind this is the rise in non-performing assets (NPAs) marring the banking sector, which has made the banks risk-averse.

Nowadays, an SME needs to have an almost perfect credit score to secure a business loan. This in turn has given rise to FinTech finance, a smarter and more efficient way of financing small and medium businesses that relies on data-driven technologies for faster loan approvals. Yet, despite their lenient approach, FinTech lenders too, assign a certain weightage to the credit score of the borrowing company.

In this post, we are sharing some tips and advice that will help your firm improve its credit rating and get a business loan.

  • Credit rating is compiled from data of your past business and credit transactions. So, if there are cases of financial irregularities in your recent past, your credit rating is going to be lower. Another factor that is reflected by your credit rating is the way in which you utilize available credit, which includes the personal credit history of payments made to credit cards, utilities, loan EMIs and mortgages. If a bulk of your income is going into such payments and your bank balances are less than ideal, the credit rating suffers.
  • Now, improving your credit rating is a matter of setting these irregularities right. It is a time-consuming process so do not expect any miracles overnight. But by following strict financial discipline, you can regain a good credit score in a few months’ time. Refrain from applying for fresh loans when you are on the way to recovering your credit score because multiple credit searches by lenders may take away crucial points from your credit rating.
  • Another thing that might be affecting your business’s credit rating is wrong information uploaded by a financial institution, such as non-closure of a bank loan account that you have paid-up months ago. So, analyze your credit report carefully to identify wrong entries and raise a dispute with the rating bureau. These updates may take up to 30 days to reflect in your credit report so be patient.
  • If you find the above-mentioned discrepancies in your credit rating, be sure to check your credit rating with other rating bureaus to see if their records are also wrong.
  • Lastly, try and use the same address in all your business accounts to indicate legitimacy. Also, use landline numbers instead of mobile numbers as it indicates that you are a stable business establishment. Try paying more than the minimum monthly amount on your credit card loans, however, you may need to improve working capital flow for that. One way to do that is to apply for a small-ticket working capital loan when your credit rating improves to further consolidate your finances.
  • Once you get back to a good credit score, keep an eye on it and make sure you do not slip back into old financially imprudent habits again.

Why Fintech Lenders Have Become The Best Choice For Business Finance

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.

Why you Should Choose a Business Bank Account for Working Capital

In recent years, the government’s push for going digital has gained traction in both private and public centre enterprises. The financial system, be it securities exchange or taxation or transactional exchange, has come under increased legal scrutiny due to digitisation. In essence, it is a noble venture that aims to do away with age-old methods of paper banking and physical verifications, but as early adopters, many small business owners are finding it a difficult transition. One of the main reasons behind these difficulties is the single-use bank accounts for personal and professional income.

In some cases, the tax authorities and banks have opened inquiries due to a mismatch between an individual’s declared incomes and actual account activity. However, later realizing that most of these account holders are small business owners using savings accounts for their professional use. So, if you are a small business owner who is yet to segregate his/her personal and professional incomes, the time to do so is quite at hand. Also, there are several other benefits of having a business bank account than simply the convenience of avoiding unnecessary legal scrutiny.

One such advantage is having access to quick finance. SMEs in India can use a current account facility for business transactions. These accounts do not generate any interest but do give selective access to working capital finance, albeit with a catch. An business has to pledge an asset as collateral before the funds are credited to its current account. So, in most cases where an SME does not have the assets to secure a working capital loan from a bank, the owner ends up using a personal account for professional use, because there is no perceived need for him to get a current account.

However, the advent of Fintech firms like Lendingkart has changed that perception by offering unsecured business loans for small and medium businesses. Business owners can now have both a current account and an access to working capital finance without pledging company assets. Plus, these loans are offered at relaxed terms and with easy repayment schedules to ease the financial burden on SME owners.

Given this change, the banks too have adapted their current accounts divisions by creating sub-categories that cater to specific business needs. Here are some of the things that are made simpler with a business account for your SME.

  • Digital Banking Services are a part of the current account. These personalized services ensure that you can access your working capital funds anytime, anywhere. Digital banking is also a more transparent way of conducting business than the usual exchange of cash. Incidentally, a lender is also more likely to trust your business credentials if you have a well-maintained current account for your business with digital transactions enabled.
  • Salary Remittance to Employees is also simplified by using a business bank account with facilities like digital approval of paychecks and invoices and real-time transfer of funds to dedicated salary accounts.
  • Checks Payable at Par is another of business bank account advantages that can help in streamlining your financial transactions across state borders.
  • Personalized Forex Rates for businesses who have clientele outside the country are offered by several banks. This facility helps in seamless international exchange of monies.
  • Interest Earnings, while not a traditional feature of current accounts, is also being explored by several public and private sector banks to market themselves as more business savvy alternatives.

So, we hope these are reasons enough for you to switch your business dealings to a current account and reap the benefits for your SME. In case you need a quick business loan you can always apply for one with Lendingkart by visiting our website at Lendingkart.com or downloading the Lendingkart Finance app on your Android device. We offer business loans at lower interest rates without requiring any collateral and disburse funds within 3 days of document verification.

Small Business Trends to follow in 2018

Every year pans out differently for small business owners. The rapidly changing scenes of our growing digital economy means new trends and practices are getting in and out at regular intervals. Take for example the phase of demonetisation and then the implementation of GST, both of these decisions have had quite an impact on small business owners and influenced their financial, technological, and promotional policies.

Today, we are sharing some trends that a small business owner needs to keep an eye on in 2018.

Moving to the Cloud

Software as a solution (SaaS) and cloud based technologies are taking over the world of small, medium and large scale business owners alike. These technologies have marked quite a discernible shift in IT spending as more companies are now embracing the sharing economy instead of spending incredible amounts on in-house IT development. Digitisation and sharing industry is expected to grow even further down the line and if your small business has an online component, you should start looking for ideal partners to integrate your services with the digital world.

Personalised Marketing

With the rise of Big Data and machine learning AI systems, online marketing has become the hotbed of business activities. The humongous amounts of data coming in from digital devices and platforms and the tremendous power of cloud computing has made personalised marketing possible, where a user sees and consumes high-value personalised content at every step. Modern marketing tools from Google are widely used for identifying target audiences and creating location specific content to generate more leads and conversions.

A major driver of the personalised marketing bandwagon is the smartphone. Mobile Ads are now generating more leads than their desktop counterparts and as a small business owner, a mobile friendly website or app can help you gain crucial advantage over the competition.

Similarly, social media marketing and paid ads on platforms like Facebook and Twitter have also emerged as a leading personalised marketing platforms. With billions of people logged in worldwide, these platforms are yet to witness the long-tail growth in the SMB category and can be your way to success.

Digital Finance

A few years ago, the advent of e-commerce was a new era in the world of business and now that distinction has gone to digital finance. Fintech firms have made it easier to get business loans online by offering quicker approvals, lower interest rates, and flexible EMI schedules. Furthermore, re-approvals of loans once they are repaid is now instantaneous. Such facilities have not only improved the ease of doing business but have also spurred economic investment in the country.

Moreover, Fintech firms like Lendingkart are actively educating small business owners on best business practices to make them more agile and street smart in money management. For example, more small business owners are now aware of keeping their private and business finances separated. Also, the number of business owners applying for small ticket working capital loans has increased in recent years. If you are wondering how that makes a difference then it’s about time you too have a closer look at this financial trend.

Small business owners often make the mistake of using the company’s capital for working capital expenditure. Since the working capital expenditure is a recurring expense (on daily, weekly and monthly basis), eventually the SME owner runs out of money to keep the business afloat and doesn’t have any assets to show for all the trouble. On the other hand, business owners who are utilising working capital loans to run their daily operations while using the company’s capital to invest in equipment and establishment have a two-fold advantage. They are running business operations with a loan that will pay for itself and they are investing in assets which will pay for themselves, thus it’s a win-win for them.

Concluding thoughts

Workplaces are going to change significantly in coming years. Digitisation, e-commerce, automation, cloud computing and online finance are no longer just buzz words but stark realities of our time. As a small business owner, embracing the digital economy is the only way forward for you, and the sooner you do it the better will be the results.

To know more about us, visit www.lendingkart.com

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.