In the course of your business operations there are times when the need for emergency cash support crops up. In order to meet your emergency need of funds, you either approach individuals, banks, NBFC or other lenders to cope with the crisis. It is with such a scenario in mind that the lenders like banks and NBFCs have designed the Line of Credit, which is plain term is a facility where you can draw money to the extent necessary from the overall limit and pay the charges for only the quantum of money used for the specified period.
Once you repay the quantum drawn, your limit is restored fully to be accessed when in need again. It has come as a boon to businessman to meets the recurring urgent fund needs that helps run their business.
Line of Credit Meaning:
You can meet your requirement of funds through a loan, which grants one-time lump sum amount to help grow your business by acquiring infrastructure, plant and machinery. You are therefore obliged to service the loan up to the agreed upon tenor through fixed EMIs aimed to liquidate the entire loan by the end of the specified tenor.
On the contrary, the Line of Credit is so designed that you are approved a limit commensurate with your business parameters and strategies, from which you are free to draw the amount necessary to meet the emergent expenses and service only the used component of the sanctioned credit amount. In this way, you are able to meet your periodic fund’s crunch and cater to the cyclic requirements that endow your business with the capability to cope with the timely fund infusion during the ups and downs in sales and revenues.
Lendingkart has just such a product which is ideally suited to Indian SMEs with liberal working capital loans which are basically a business line of credit.
Line of Credit India Offers:
The traditional lenders like banks and NBFC offer Line of Credit primarily in two forms. They are secured and unsecured. The very nomenclature of the type of advance is indicative of its basic features, but it is imperative to learn about it in greater detail to have a clear insight into the nature of the line of credit loan you are getting into.
- Secured Line of Credit: It is a type of advance where you pledge your asset as security for availing of the facility. By the very nature that the advance is covered by adequate security, allows the lender whether a bank or the NBFC, to offer liberal and lower rates of interest considering that the risk is lower in case of default and there would be ample opportunity to recover the outstanding advance amount by liquidating the security.
- Unsecured Line of Credit: As the name suggests, there is no collateral involved as security, thus endowing the advance with a greater amount of risk. The interest charged in such a facility is higher considering the recoverability factor being low in case of default. Notwithstanding the risk factor, our working capital loans at Lendingkart are unsecured by nature. We also offer the line of credit at Lendingkart on easy terms and approval is granted in 3 days time once the documentation process is successfully accomplished by you.
Advantages of Line of Credit:
There are various ways in which the line of credit is described in India. It can also be termed as overdraft facility by the nature of transactions in the operation of the facility. Needless to mention, there are a host of advantages liked to this form of a line of credit loan India offers to the borrowers.
- Rate of Interest: There are two features in the rate of interest charged in the line of credit Firstly, the rate is comparatively lower than the traditional loans on offer. Secondly, the loan outgo is lower considering that the service of loan is only to the extent of the fund used and not the entire sanctioned amount.
- Use of Funds: Irrespective of the amount of line of credit sanctioned, you are free to use only the exact requirement to meet the fund’s crunch, unlike a loan, where you are disbursed the entire amount of loan sanctioned to be repaid in agreed upon EMI and tenor.
- Low Risk: It is crucially advantageous to the SME sector who can draw smaller amounts, thus being burdened with lower liabilities and the possibility of easy liquidation, thus ensuring the continuity of business.
- Better Choice: For the self-employed, a line of credit is a better choice any day than a personal loan which also offers a similar solution, but at a higher cost. It is therefore better both in terms of flexibility and cost.
- High Limit: Most lenders offer a higher limit to borrowers seeking a line of credit than a loan considering the factors involved and viability of the business for an ensured continuity.
- Mental Peace: The line of credit is of immense mental peace to you, as you are sure of the source of an emergency fund in the account which will enable you to ensure continuity of business. It is the easiest way to cope with the cycles of upheavals encountered in sales and revenues that is an inherent part of any small and micro-enterprise.
- Easy Application Process: Most of the lenders offer an easy mode of application, more so at Lendinkart, who pride in the fact that they offer a digital interface that is not only robust, but also user-friendly at the same time. At Lendingkart, we are more than happy to host you with an assurance to process the loan in three days time once you have completed the online submission fully.
- Continued Ownership: The basic advantage provided by Lendingkart in their Working Capital Loan as they refer their line of credit, is that you do not have to liquidate your assets or reduce your equity to meet the fund’s crunch. Their line of credit ensures a perpetual cash flow to meet the finds necessity at required intervals.
Eligibility for Line of Credit:
The line of credit facility is extended by all the lenders in India and the terms are well suited for the target audience. However, while seeking your line of credit, there are a few cardinal points that you need to bear in mind. One of the major acts on your part is to make a realistic analysis of your fund requirement in the long run in alignment with your business strategies. A considered approach commensurate with your needs ensure the sanction of your proposal without much hassle rather than get rejected with grandiose plans. Lendingkart has a liberal norm of eligibility criteria which at best can be termed as relaxed. The primary parameters for eligibility are:
- The business mandatorily must be in operation for more than three months.
- The minimum qualifying turnover required is Rs.90000 during the last three months from the date of application.
- The location of the enterprise should be excluded from the negative list at Lendingkart.
- It is important to note that Trusts, NGOs and Charitable Institutions are excluded from the list of eligible entities for the benefit of working capital loan or line of credit at Lendingkart.
Features of Line of Credit:
Now that you have a line of credit explained to a great extent, it is important to learn about the features off the line of credit at Lendingkart. Among the various features offered, we at Lendingkart offer the following which is a definite edge over the traditional lenders in the Indian market.
- Allows you to preserve the ownership.
- Rationalizes your cash-flow requirements for the continuing health of your business.
- We help you to improve your credit score that in turn improves your creditworthiness for all your future endeavors.
Having considered all the above redeeming features that make Lendingkart an attractive destination for your line of credit are:
- Quantum of Loan: The liberal range offered is from Rs.50000 to Rs.2 crore.
- Rate of Interest: It is customized considering several factors including the credit profile in a range of 1.25% to 2% per month on an average
- Processing: One time charges of 2-3% the credit amount sanctioned:
- Foreclosure: It is nil.
- Tenure: The normal tenure allowed for the line of credit is 2 years.
- Repayment: In convenient and flexible installments payable monthly or bi-weekly.
Documents Required for Line of Credit:
One of the most important aspects of the application for line of credit is the complement of documents. While most lenders call for a uniform set of documents for the eligible borrower for line of credit, at Lendingkart we call for the following in the case of Single Individual Proprietorship, Private Limited or Partnership Company:
- Proof of Business Registration: It can be in any of the following and is acceptable at Lendingkart:
- Business Registration Certificate
- Trade License.
- Drug License.
- VAT Registration.
- GST filing proof.
- Bank Statement: The previous 12 months statement of the operative bank account is mandatory.
- Copy of PAN card.
- Copy of Aadhaar card.
- Valid address proof of self and the business entity.
- All the copies of cards applicable to the proprietor.
- Additionally a copy of Partnership Deed.
- Company: A copy of the PAN card.
Income Tax Returns: If the credit limit is high, as in the case of some lenders over Rs.15 lakhs, the latest Income Tax return is sought.
Line of Credit Application:
Having gone through all important aspects of line of credit and their efficacy in the small business scenario in India, it becomes imperative to be enlightened about the various facets of the application procedure prevalent in India. Most lenders in the country provide the option to apply for line of credit online, but in most of the cases it is perfunctory. The process is completed offline in the branch premises. At Lendingkart we offer a digital interface in making the process fully online keeping with the modern trends and convenience. The entire procedure can be accomplished in Lendingkart in the following three steps which can consume at most a few minutes for one who is computer savvy:
- Step1: Complete the application and submit it.
- Spep2: Upload the required documents which are required to be in digitized format. .
- Step3: Lendingkart evaluates the applications and affords in principle sanction.
Line of Credit FAQs:
1. Which are the segments preferred for line of credit facility?
2. How do you compare line of credit vs loan?
3. How do you compare line of credit vs overdraft?
4. How do you compare letter of credit vs line of credit?
5. Can the line of credit repaid anytime?
The banking scenario in the present times is plagued by rising NPAs and other related ills converting into a credit squeeze. The SME sector is hit hard by the lack of adequate credit facilities adversely impacting the GDP as this sector alone comprises 45% of it. Alternate lenders like Lendingkart, a non-deposit NBFC have stepped into to fill the vacuum and provide the necessary fillip to the SME sector with hassle-free credit option through line of credit called Working Capital Loan. The inherent benefits offered and the ease of the process at Lendingkart makes it a much sought after option for line of credit.