Everything you need to know about Debt Refinancing Loans

26 Apr 2018

In the present day financial environment when you take out a loan, whether for personal use or for a business purpose, there is no certainty that you will be able to repay the EMIs on time. You may try your best to keep paying the EMIs on time, but due to some reasons beyond your control, you might not be able to keep your commitment. In such a situation there is a chance of defaulting on the loan which could destroy your credit score.

In another scenario, you had to take a loan desperately to meet your financial requirements, but as you were desperate, the lender forced unfavourable terms on you. Now, these terms are starting to hurt your financial position, and you need a way out.

In both the above situations, Debt Refinancing is the only viable option that you have.

What is Debt Refinancing?

Debt refinancing, commonly known as a balance transfer, is the process through which you consolidate your multiple loans into one new loan with a new lender on favourable terms. These favourable terms usually are lower interest rates and longer repayment tenor. Debt refinancing saves you from defaulting on your existing loans and offers you the option of lower EMIs and lesser interest outlays. When all your existing loans are consolidated into one single loan, it becomes easier for you to make the repayments. This helps you rebuild your financial position.

 

When to opt for it?

The decision to exercise the option for Debt refinancing can be taken due to any of the following reasons: –

  • When the existing loan has a very high rate of interest and other associated charges.
  • When you feel that your finances are under stress and you need to reduce the EMI burden.
  • When you want to consolidate your multiple running loans into one single loan.
  • When you need some time to improve your financial situation.

 

Precautions to take

Always remember that when you refinance your debt, the new lender might put some unfavourable conditions in the fine print, so you need to take the following precautions when refinancing your debt: –

  • Make sure that all applicable charges and interest rates are explicitly mentioned in the agreement.
  • Object to any clause that refers to a periodic increase in the interest rates.
  • Keep a note of the various charges being applied and if they are as per market norms or not.
  • Consult with a professional before taking any decision.
  • Check the background of the new lender and see what their existing customers have to say. If they are making any tall claims, then you need to be aware as your debt cannot just disappear overnight.

 

Checklist of Documents

Following are the various documents that you need to provide to the new lender for processing of your application: –

  • Audited Financial Statements for last three years
  • Bank Statement for last one year
  • Income Tax Returns for last 3 years
  • Copy of the collateral documents
  • Existing Loan Account statements
  • KYC Documents

Debt refinancing is an excellent option if your financial situation is under stress and you need some time to be able to reorganize your finances without defaulting on existing loans.

Different Types of Small Business Loans

20 Apr 2018

If you are a small business owner that must understand how difficult it is to manage various tasks to keep the business running smoothly. Most of the times you are multi-tasking and are handling multiple tasks at once. But in such situations, you might not be able to devote full attention towards the financial condition of your company. Suddenly you realise that you need to purchase new machinery or renovate your factory or are facing working capital crunch. Your emergency reserve might not suffice, and you would not want to put all your personal saving in it. What can you do in such a situation?

Your best option is to avail a small business loan. Financial Institutions such as Banks and NBFC’s extend different types of small business loans according to your requirements. As there are many types of loans available, you need to understand their features to be able to take a sound decision.

Following are the most popular types of small business loans available in India: –

  • Unsecured Business Loans: – As the name suggests, these business loans do not require any collateral and are unsecured. Unsecured business loans are provided by almost all types of financial institutions and can be used for any purpose that you deem fit ranging from the renovation of building to payment to suppliers. But as these loans are unsecured, lenders want you to have a good credit score and a decent credit history otherwise the application might be rejected.

 

  • Term Loans: –Term loans are offered by the financial institution for the purpose of purchasing a capital asset such as machinery, land or equipment. These loans are secured in the sense that the acquired asset needs to be hypothecated with the lender. It is very useful for you as you need not take out a huge chunk of cash out of your working capital, you can easily purchase the capital asset with the loan and repay in EMI’s.

 

  • Working Capital Limits: – Working capital limits are offered by banks against your current account to help you meet the shortfall in your cash cycle. Sometimes you must sell the goods on credit, but you still need to pay the expenses and make payment to suppliers in the meanwhile. Working capital limits help you overcome seasonal variations and ensure that you can meet your liabilities on time. You only need to pay the interest on a monthly basis and can pay the principal according to your financial situation. Interest is calculated on a daily basis on the amount outstanding.

 

  • Loan against property/Top-up Loan: – It is a secured loan where you need to mortgage your property with the lender to avail the loan. The amount thus obtained can be used by you for any purpose as there is no restriction on the usage of funds. Similarly, if you have a Property Loan with a financial institution and the value of the property is more than the loan amount due, you can avail a Top-up Loan for your requirements.

 

  • Bank Overdraft: – It is a temporary facility which allows you to withdraw more amount from your account than the available balance. This facility is useful when there is a cheque presented to your account, and the balance is insufficient. Your banker would pass the cheque by extending the overdraft facility. The amount lent to you is adjusted as soon as there is sufficient balance in the account. Interest is charged on a daily basis on the amount due.

 

There are numerous types of loans available for you to meet your finance requirements. You just need to select the appropriate loan after analysing your needs and repayment capacity.

Why is Debt Refinancing a good idea?

16 Apr 2018

If you are a business owner, then you must understand that sometimes due to the circumstances, you need to take a loan to keep your business on the growth trajectory. But it is possible that at that time your need was desperate, and you could not negotiate hard with the lender. As such you are stuck with various high interest-bearing loans with unfavourable terms, it could be detrimental to your business as you are interested outlays are significantly putting a strain on your finances. But are you doomed to this fate? Most certainly not.

 What is Debt refinancing?

With the option of Debt Refinancing, you can now get rid of your high interest-bearing loan easily. Debt refinancing is the process of converting an existing loan into a new loan. The main purpose of debt refinancing is to reduce the rate of interest and consolidate multiple loans into one. Once your debts are consolidated into one loan, it becomes easier for you to repay the said loans.

Who offers this option?

Debt refinancing is offered by almost all financial institutions, banks as well as non-banking financial corporations. It is also known as a balance transfer, i.e. you transfer the outstanding balance to a new loan with favourable terms. When you exercise this option of debt refinancing, you can get your short-term loans converted into long-term loans, thus easing up the pressure on your finances.

When should you go for Debt Refinancing?

Debt refinancing is a very beneficial process and can be exercised by anytime you like. Following are the particular situations when it is a good idea to get your debt refinanced: –

  • When your existing loans carry a higher rate of interest as compared to the market rates.
  • When your financial situation is precarious, and you are looking to cut down on expenses.
  • When you have multiple loans running and are unable to manage them.
  • When you want to extend the tenure of your existing short-term loans.

What are the benefits of Debt Refinancing?

Debt refinancing offers you a number of benefits such as,

  • Ease of Repayment: – When your multiple loans are consolidated into a single loan, then it is easier for you to keep track of the EMIs and make the repayment on time. When your debt has been refinanced the new EMI is going to be lower than the existing EMIs, making it more affordable for you.

 

  • Save Interest Expenditure: – When you refinance your existing loan to a new loan, you save a lot of money on interest payments. The change might not seem huge to you, but a reduction of even 0.25% turns into a huge amount in the long run.

 

  • Manage finances effectively: – When you only have one loan running and that too at a lower rate of interest, you are able to cut down on your expenses and can manage your finances better.

 

  • Save from default: – If your financial situation was precarious and you were on the brink of default, debt refinancing gets you some time to reorganise your finances and make sure that you can repay the EMIs for the new loan on time.

 

If you exercise due caution, Debt Refinancing can help you save a lot of money and hassle associated with your existing loans.

How can working capital loans help you overcome short-term liquidity crunch

24 Mar 2018

When you are running a business, there are instances when your cash flow falls short of the requirements, and you feel that you need some funds urgently. This situation occurs when you have not planned your finances carefully or due to seasonal variations. But there is no need to worry about such a situation now; Working Capital Loans are the answer to all your short-term liquidity woes.

 

What is a Working Capital Loan?

By definition, working capital is the money that you require managing your daily expenses till your payments are realised. In most of the industries, sales are done on credit basis ranging from 30-180 days. During this period, you need to take care of all your expenses as well as make payments to the suppliers. This is where Working Capital Loans come to your aid.

Working Capital Loan is a short-term loan to help the borrowers finance their daily operations. In the present day uncertain working environments, many established businesses falter due to lack of working capital. Liquidity crunch can lead to loss of opportunities and can even spell doom for the business. In such situations, working capital loans help you meet your short-term and immediate requirements without any hassles or overheads associated with other modes of finance.

 

Who offers Working Capital Loans?

Working capital loans are offered by both banks as well as non-banking financial corporations for their business customers to meet any short-term funding requirements. Working capital loans can be unsecured as well as secured depending on the lender and your credit history. The duration of working capital is generally up to 12 months.

 

Benefits of Working Capital Loans

Working capital loans enjoy various advantages over other types of loans and finances, such as: –

  • Quick Processing: – Working capital loans are processed quickly by the financial institutions and only require basic documentation to get the loan processed and approved. Many lenders are now offering the application facility online also. As these loans are processed quickly, they are most suitable when your need is urgent, and they enable you to take benefits of the opportunities available.

 

  • Flexibility: – Working capital loans can be used as per your discretion and for whatever purpose you deem fit. While running a business, it is not possible to pre-plan everything. Sometimes some emergency expenses might come up that must be taken care of, in such situations working capital loans come to your rescue. You need not submit any information to the lender regarding the usage of the loan.

 

  • No Dilution of control: – When you opt for a working capital loan you enter into an agreement with the lender to repay the EMI’s on time. There is no interference from the lender in your day to day operations, and they won’t even bother you if you make your payments on time. You need not compromise on the ownership of your business.

 

  • Savings on Interest: – Many banks offer the working capital loan as a line of credit, which is also called working capital limit. Here you need not pay any fixed EMI; you only need to pay interest on the amount you have utilised per month, not on the whole loan amount.

 

Working capital loans offer you the flexibility to sell your goods and services on a credit basis to expand your customer base and at the same time meet your liabilities in a  timely manner.

Factors Associated With the Immense Growth of Fintech Industry

26 Feb 2018

The rise of the financial technology industry puts a direct impact on the services associated with the financial services. New technologies and trend arise every year and move the Fintech industry one more step up the ladder.

The fintech industry depends on various aspects. Hence, the immense growth in the industry has been possible due to multiple factors. Here are all the factors that have helped the fintech industry to rise and grow.

1. Evolved artificial intelligence
AI or the Artificial Intelligence has been one of the great factors for the growth of fintech. The industry has attained much better approach towards big data and business procedures. The ease of handling the financial transactions, analytics and other processes has become possible with the improved AI. The companies are now able to analyze large databases without taking too long. This has given the fast pace in the processes, which helps the small businesses.

2. Demand for flexible lending
The lending processes have become much more flexible. The fintech industry responded to the great demands of the small businesses. The SMEs required the alternative methods to easily attain loans. Hence, the fintech industry leveraged the digital and automation processes to connect SMEs with a wide group of interested lenders. This not only improved the options and opportunities for the SMEs but also helped in the evolution of fintech industry.

3. Easy mobile transaction methods
The mobile transactions have boosted to a great extent in recent times. And those facilities have affected the methods of transactions in the fintech industry. The traditional methodologies have changed to a much better and faster pace of the transactions.

4. Open banking opportunities
Open banking has allowed the fintech industry to improve the quality of the procedures using banking data. This way the services have become much more effective and efficient for the businesses with new tools and technologies.

5. Automation of the agreement procedures
The industry has moved towards automation in terms of agreements. The technologies and evolved software are being used to implement multiple agreements without taking too much time or efforts. The capacity to complete the contract procedures faster has become beneficial for both small as well as large businesses. This fast pace allows the businesses to focus mainly the processes of growth and improvement in the productivity.

Apart from the mentioned ones, there are various other reasons for the rise of the fintech industry. Improved regulation, better technologies, and the high-security levels have been turning factors for the industry. The financial technologies are now at its peak more than ever. And the businesses are gaining immense advantages with that too.

Changes that your business will have to make for India’s biggest tax reform

1 Nov 2017

We all have been speculating the ins and outs of GST which stands for Goods and Services Tax for a long duration, well things have changed now as this very tax reform has been put into action to cope up with the inflation and ever increasing price related problems. For sure there are a number of people who are praising the actions taken by the Indian government, but there are few who are opposing this tax reform right after the demonetization action which in a way left Indians confused and in a dilemma whether this action was necessary or not. For sure on papers GST sounds like a great option, but in real life will it prove to be beneficial for common people of this country. If you are still confused, here’s how your business needs to change for GST.
Demonetization left common people shocked, but with GST things are a bit different. It is the business owners both small as well as well-established ventures who will feel the effect of GST. There is still confusion on the changes will their business need in order to comply with the biggest tax reform India has seen after independence.
For sure almost every company, no matter whether small or large was complaining that they weren’t ready for such drastic change in tax law, but Indian government’s refusal to make any further delay in the launch forced them to accept and expedite the process. The common belief among business owners that GST will make conducting business easier has acted as a motivation for business owners to accept the tax reform.

Here’s how your business needs to change for GST
• Some necessary changes will be made to businesses operating in India. Small and medium industries which were independent and were used to not follow the procedures and weren’t under the compliance to follow the regulations, will have to take their system online for legally conducting their business. The system that needs to be online should be prepared for invoices, billing, input tax credits, returns and numerous similar actions under Goods and Services Tax. Existing systems require being updated and overhauled, training modules for employees will need to be updated, and SOPs will need revision as per the new tax reform.

• With GST, the mandatory training of the employees or manpower has also been made necessary. Everyone from bottom to the top will need to be trained, for sure the training will vary as per the allocated jobs of the employees, but they will need to be trained in the manner in which respective businesses are conducted under GST.

• The price of products will change to a great level. Prices of some products will go up while most of the products will be cheaper because of implementation of one tax. Now people won’t have to worry about paying a variety of taxes for a single product. This very reform has surely made things easier for consumers as they will get better transparency to the way tax is imposed, you will have to make amendments in the pricing of existing goods and services owned by your business.

Are you Wondering about How to Qualify for Commercial Loans?

31 Aug 2017

Many businesses in the world today are very cautious of their cash flow.  As the business keeps growing the more, their needs will be and the more they will need more finances for one reason or the other. For this reason, many people have sought after commercial loans from banks or other sources. As a business owner, you may also be in a position where you are thinking about commercial loans. You may be wondering about the things you can do to qualify for a commercial loan from your local bank or any other place. Well, worry no more. We will answer your question of how to qualify for a commercial loan.

How to Qualify for Commercial Loans

Just because you need a commercial loan does not mean that you are going to get it. Even so, you can do a few things to ensure that you get that commercial loan that you are in dire need.

  1. Ensure you have a great credit score both personal and for the business
    Many banks and even money lenders usually like to see just how good you are at repaying loans. Judging from previous load repayment score they can determine if you are worth the risk or not. When your credit score is higher the chances that you will get a loan are very high.
  2. Know their minimum requirements and beat them
    Always ensure that you meet the requirements listed for a commercial loan by banks and lenders. Do not leave any loopholes that can be used against you and discredit you. There are so many people out there looking for commercial loans. Any small opportunity to disqualify a person will be used to filter a large number of applicants.
  3. Work thoroughly on your business plan
    If you are going to ask for a commercial loan, the bank or lender will need to know more about on the kind of investment you are going to make with that money. Make sure that your business plan is a winner and that has every strategy laid out correctly. Make it convincing, and you will have your loan approved. If the business has some risks, make sure you have a recovery plan always that will ensure you do not suffer much when the risk plays out.
  4. get yourself a perfect gurantor
    Do not underestimate the power of having a great guarantor. If you do not want to put your property as security for the loan, get people who have great loan repayment scores. Ensure that you get people whose ability to repay the loan is not questionable in case a need arises for them to repay.
  5. Have assets in place
    If you do not have a guarantor, you still have to give some assurance to the lender or the bank. You will have to use your assets as security for the loan. The asset must be worth the loan you are getting. This is what the bank or lender will seize if you do not fulfill your end of the bargain.

Advantages and Disadvantages of Working Capital loans

8 Aug 2017

If you are a business owner and you have been looking for an easier and efficient way to secure funds in order to use it to grow your business than working capital loan can be a great catalyst for you. It isn’t a secret that for getting anywhere in the business world, one of the most important thing that one needs is capital to back his or her idea or to expand his business. They need capital for growing business is for bearing expenses such as payroll, marketing cost, and other financial expenses. It can prove quite difficult to adjust to the rise in the capital need to nurture your business’s growth, but with fantastic options like working capital loans, one can easily handle the situation.

You should know that working capital loan can be used for meeting short-term and immediate needs of your business or company. Your cash or capital at the bank might have been sufficient in the past, and you might have been able to secure funding because your customer base in past but, at some instance every business owner faces situation where they need more capital as the available liquid capital might not be sufficient to meet your company’s expenses. It is better to be aware of the viable options and evaluating the pros and cons of the available options rather than waiting for the time when you need capital urgently.

The answer to “how to apply for the capital loan” can vary with respect to different lenders, but the basic procedure is same and quite simple. For sure most of the newbie business owner think that using personal resources as a viable and good option in such instances, but in reality, it isn’t a great option, however working capital loans is a better option than the former one. As the name suggests working capitals loans are designed and introduced to help companies or businesses to meet their daily expenses such as paying employees or needing cash for growth ventures. If you aren’t familiar with the term working capital, then you should know that working capital is the sum of what your clients or customers owe you and the inventory that you have produced or built minus the amount that you to your suppliers and employees.

If you are considering this option then for sure you should consider checking out how to apply for the capital loan and the ins and outs of this loan.

Like other types of loans working capital loans to have its pros and cons. Some of the advantages and disadvantages of working capital loans are enlisted below:

Advantages of working capital loans

• No requirement for collateral in exchange for loan amount
• You are free to use money as you deem important
• The offer is short term, so you won’t have to worry about the burden of having a loan for long
• Gaining approval is easy and quick

Disadvantages of working capital loans
• Higher interest rates
• This type of loan might affect your credit ratings, not in a good way

GST facts that every taxpayer and businessman should know

8 Aug 2017

Goods and Services tax is supposed to be well designed in order to rationalize and simplify the previous multilayered tax regime in order to eliminate unnecessary taxes on basic food items and for placing Indian economy on a high growth trajectory. Well, GST might have positive and negative points associated with it, but Indian population is currently in appreciation of the reforms taken by the present government to eradicate the complex and confusing indirect tax regime. However, small sector businesses are in opposition and are not happy with this tax reform at all.

GST has been designed to make the taxation system transparent and make it simpler. GST has replaced multilayered tax regime. Things are a bit difficult, though common people will not see a lot of changes after the implementation of GST for some duration, it is the Small and Medium Enterprises that have been hit hard by GST. Almost all the products have been covered under GST except Petroleum products and alcohol. Well, if you haven’t read anything about GST yet or if you have a bit of confusion about GST or have a desire to find important things to know about GST for Business, this article will surely help you in finding answers to your questions.

Here are some basic of GST that every Indian should be aware of.

What is GST?
Git can be defined as a replacement for multilayered taxation system and is aimed to transform Indian market to a unified common market. Single tax on goods and services, from the very start which means from manufacturer to consumer. Well, the tax rate has been decided by the government and is categorized into four categories. The basic food items surely have become cheaper, but luxurious items and packaged food price will see a considerable increase.

Benefits of GST

For consumers
• The confusion generated within the population because of hidden taxes was surely a problem that needed attention. However, with GST people will not have to face this problem. As the tax paid now will be transparent and will surely to some extent help tackle the inflation in the market.
• In the long run, the overall tax burden over commodities will decrease to a great extent offering relief to the Indian population.

Benefits for business
• One of the best things about GST will be its easier compliance. A comprehensive IT system is used as the foundation of the GST regime. One can complete the registration process, return and payment online itself. You won’t have to run from office to office in order to get the work done.
• The common rate feature of GST will make it possible for business owners to expand their businesses to various other parts of the country without the need for huge amounts of paperwork and with the burden of complying with different tax rules in different states.
• E-commerce sites or the market will be the one getting most out of the GST tax reform.

Business Loans – A great option for startup businesses

26 Jul 2017

No matter whether you are planning to set up a new business or desire to take your business to the next level, neither of those options is easy to do in a day. There are factors that must be taken into consideration before taking the plunge. Mainly, startup businesses are dependent on business loans for most of their business requirements. It is of utmost importance to weigh all the pros and cons of the options to make sure that the business loan can cater to your financial needs.

We won’t be covering the details about different loan options available for business. But will be addressing to one of the most common questions that startups and well-established business owners alike have in their mind- whether getting a business loan is beneficial in the long run of the venture

There are a number of benefits of applying for business loans rather than waiting on profit generation from your business to help you expand. The idea of loan seems like a black hole to most of the people and are left with that the question whether availing a loan will finally leave them broke. In reality with thorough research and great decisions, you can make sure that business loan will not burn a hole in your pocket. Some of the benefits of applying for business loans are well described below:

Easy to avail
A number of institutions or lenders are out there offering business loans asking for a sensible collateral or guarantee. This kind of loans makes it easier for startup or small business owners as they can easily gain access to the fund that they need to keep their business afloat in this highly competitive market and for meeting their businesses cash flow requirements.

Grow business
Businesses might need some financial help from lenders or similar institutions to gain funding for managing their operations as per their business cycle and development plans. In business expansion mode this borrowed money can help business owners to move up the value chain. It is important to reflect on the part that here, generally, lenders don’t specify t conditions regarding where or when you can use the money, which makes available loan fund to be used accordingly however you seem fit.

Great repayment options
A number of lenders offer different repayment options to their clients, so it’s easier than ever before to avail a bank’s services. You can choose the best repayment option that suits you and can rest assured about your decision of taking a business loan.

Highly affordable
It has been a common belief amidst a large section of the population that business loan interest rates are exorbitant. Well. In reality, this is contrary to popular belief as there are various deductions made to interest rates when you are taking a loan to start a business or to upgrade your existing one. The processing and the commission fees are nominal which surely makes it easier for businesses owners to take business loans.

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