Preeti runs a handicrafts shop in one of the prime commercial markets in Delhi. She set up this shop significantly more than two years back and the response from customers has been very much encouraging. She sources the raw pieces from local artisans across North India and gets those worked on by another pair of artisans in Delhi. Her customers originate from around India and even from abroad. Most of the regulars are very impressed by her trade that they desire her to begin branches in their cities or at least enter into partnerships with local dealers there. However, each one of these initiatives require funds and while she is confident of doing well in future, getting usage of the proper business loans in India is just a major obstacle. Also, while creating a trading remains easier, routine operations require regular usage of loans from the capital finance India market. There are lots of such entrepreneurs as Preeti whose expansion plans don’t materialise due to want of adequate infusion of funds.
Also, she has by now realised that it’s normal to anticipate a delay of 30-90 days in getting payments from customers for bulk orders. This type of delay impedes her power to scale up her trading unless she seeks business loans in India. Previously, she has 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 always have adequate collateral, even for taking a business loan in Delhi. The capital finance India market suggests that banks follow a predetermined format for loan applications, and those require her to provide way too many documents in support. Moreover, she needs to make several rounds with their branches and present detailed projections related to her trading prospects.
Such prolonged processing for verifying the application for a business loan in India negates the very intent behind taking short-term business loans for an enterprise that’s trying to scale up operations. Moreover, the short-term loans supplied by banks follow a firm repayment schedule that will not take into account the genuine problems faced by a small trading during its operations. Additionally they impose penalties in case there is pre-payment of business loans in India, sotrading persons are compelled to bear the loan burden for the entire tenure.
Fortunately, yesteryear decade has seen the rise of technology-enabled lenders called FinTech companies. These lenders utilize 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 enterprise loan is approved, the amount 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 Quantity of Business Loan in India: A business owner should carefully estimate the requirement for business loan in India and only seek the amount that is sufficient to scale up its business. Overestimating the requirement will put an unnecessary burden on its operational costs while underestimating the need shall defeat the very intent behind seeking a business loan in India. Business loans in India need to be repaid as per schedule, as any deviation shall lead to a poor effect on 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 must be convinced in regards to the loan repayment convenience of a business before disbursing loans to them. Therefore, it is important that you prepare an effective business case for seeking business loans in India. As an example, if you want the business enterprise loan to bridge the shortfall in cash flow, state that honestly and upfront. A small business genuinely faces cash flow problems due to delays in receiving payments from their customers. However, this delay should not affect their future business needs scale out vs scale up, so it is easier to take a short-term business loan. Similarly, an on the web seller may require a business loan to boost its stocks before a forthcoming festival where it’s confident of creating an excellent revenue. This type 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 that have been in operation for significantly more than two years and have healthy business financials. It provides urgent funds for a short-term business need and can be studied for a period of time varying from a couple of months to three years. Similarly, a business that has pending invoices from large companies may consider taking supply chain finance or invoice financing. This type of business loan provides as much as 80% of the pending invoice amount upfront, and the customer has the choice of paying back 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 will get as much as 200% of your monthly card receivables as advance. This amount is paid back through deduction of a fixed percentage of the card settlement each month until the advance amount alongside lender charges are paid back total.
Another product, online seller finance is good for merchants who sell aggressively through online marketplaces. A merchant may take business loan in Delhi to tank up stocks during a sale or even to touch base to more customers across different regions.
4. Compare the Annual Percentage Rate of Business Loans: Today, there will be a lot of choice 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 receive loan offers from different lenders, it’s prudent to check the annual percentage rate (APR) provided by every one of them. This shall provide a reasonable notion of how expensive a certain trading loan is and whether taking a business loan from a particular lender is worth the price or not.
A small business 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 are not riddled by legacy loan processes, and their products have already been designed to provide maximum benefit to small trading, when it comes to both transparency and loan repayment schedules.