Preeti runs a handicrafts shop in one of many prime commercial markets in Delhi. She setup this shop a lot more than two years back and the response from customers has been quite definitely encouraging. She sources the raw pieces from local artisans across North India and gets those done by another group of artisans in Delhi. Her customers come from all over India and even from abroad. Most of the regulars are very impressed by her trade that they desire her to start branches within their cities or at least get into partnerships with local dealers there. However, every one of these initiatives require funds and while she is confident of succeeding in future, getting usage of the best business loans in India is just a major obstacle. Also, while creating a trading continues to be easier, routine operations require regular usage of loans from the capital finance India market. There are many such entrepreneurs as Preeti whose expansion plans don’t materialise due to want of adequate infusion of funds.
Also, she’s by now realised that it’s normal to anticipate a delay of 30-90 days in getting payments from customers for bulk orders. This kind of delay impedes her ability to scale up her trading unless she seeks business loans in India. Previously, she’s approached banks and other traditional non-banking finance companies (NBFC) with loan applications in the capital finance India market. Most demand collateral for providing business loans in India. However, small businesses like Preeti’s do not necessarily have adequate collateral, even for taking a business loan in Delhi. The capital finance India market implies that banks follow a predetermined format for loan applications, and those require her to supply too many documents in support. Moreover, she needs to make several rounds to their branches and present detailed projections related to her trading prospects.
Such prolonged processing for verifying the application form for a business loan in India negates the intent behind taking short-term business loans for an enterprise that’s attempting to scale up operations. Moreover, the short-term loans provided by banks follow a firm repayment schedule that will not take into consideration the genuine problems faced with a small trading during its operations. Additionally they impose penalties in case of pre-payment of business loans in India, sotrading persons are compelled to bear the loan burden because of its entire tenure.
Fortunately, days gone by decade has seen the rise of technology-enabled lenders called FinTech companies. These lenders use the latest technologies such as Big Data and other data analysis techniques to process the loan application in the capital finance India market. A trading owner can complete the loan application online or through the mobile app, and once the business loan is approved, the quantity is credited to the financial institution account within three working days.
However, before a business thinks of taking a loan for scaling up its business, here is some key advice:
1. Always Take the Right Level of Business Loan in India: A company owner should carefully estimate the requirement for business loan in India and only seek the quantity that’s sufficient to scale up its business. Overestimating the requirement will put a pointless burden on its operational costs while underestimating the need shall defeat the intent behind seeking a business loan in India. Business loans in India have to be repaid as per schedule, as any deviation shall cause an adverse affect the credit rating of the business. In the capital finance India market, lenders review the credit rating seriously before considering a business loan application.
2. Prepare the Case for Taking Business Loans in India: In the capital finance India market, a lender needs to be convinced about the loan repayment capability of a business before disbursing loans to them. Therefore, it is vital that you prepare a proper business case for seeking business loans in India. As an example, if you want the business loan to bridge the shortfall in cash flow scale up vs scale out, claim that honestly and upfront. A small company genuinely faces cash flow problems due to delays in receiving payments from their customers. However, this delay shouldn’t affect their future business needs, so it’s simpler to take a short-term business loan. Similarly, an on line seller may need a business loan to boost its stocks before an upcoming festival where it is confident of earning a great revenue. This kind of trading should confidently present its case before a lender in the capital finance India market. This shall boost its likelihood of securing business loans in India.
3. Choosing the Right Financial Product: FinTech lenders in the capital finance India market understand the trading cycles of small businesses and accordingly offer new and innovative business loan products. As an example, term finance is definitely an unsecured loan for businesses which were in operation for a lot more than two years and have healthy business financials. It gives urgent funds for a short-term business need and can be taken for a period of time varying from a few months to three years. Similarly, a business that’s pending invoices from large companies may consider taking supply chain finance or invoice financing. This kind of business loan provides up to 80% of the pending invoice amount upfront, and the client has the possibility of paying in instalments or in one single go whenever the invoice payment is received.
Just in case a business receives payments from customers through credit/debit cards, it might consider taking a merchant cash advance. Here, you may get up to 200% of one’s monthly card receivables as advance. This amount is paid back through deduction of a fixed percentage of the card settlement monthly before the advance amount along side lender charges are paid in total.
Another product, online seller finance will work for merchants who sell aggressively through online marketplaces. A merchant will take business loan in Delhi to tank up stocks during a purchase or even to touch base to more customers across different regions.
4. Compare the Annual Percentage Rate of Business Loans: Today, there is a lot of preference in the capital finance India market while applying for business loans. Most loan products by FinTech companies have already been designed remember certain requirements of small organisations. However, once you obtain loan offers from different lenders, it is prudent to test the annual percentage rate (APR) offered by each of them. This shall provide a fair notion of how expensive a certain trading loan is and whether taking a business loan from a particular lender is worth the cost or not.
A small company should look beyond banks and traditional NBFCs towards new age FinTech companies that provide more importance to trading prospects while providing business loans in India. They’re not riddled by legacy loan processes, and their products have already been designed to supply maximum benefit to small trading, when it comes to both transparency and loan repayment schedules.