Categories: NewsSMEs

Making Business ‘Credit’able- Financing Options for SME’s

There are multiple financing options available for SME’s to grow their business 

The business financing landscape is continually changing, with more options available to business owners than ever before. About half to two-thirds of these businesses seek financing from a number of places, from owner investments to non-bank sources. As small businesses continue to face
challenges when it comes to gaining access to capital and taking advantage of opportunities to grow, it’s important that they are seeking the right type of financing for their particular needs. There’s been a lot of focus on “alternative” lending recently, but how do business owners know when this is the right option to pursue?

One of the most obvious and common answers is that businesses seek financing when they’re faced with an unexpected opportunity or challenge that requires quick capital.

Talking about the SME’s, have lots of options for accessing capital. Moreover, they often face resistance from traditional options. This sector has been struggling to keep up with market transitions.

A SME require timely and adequate capital infusion through term loans and working capital loans, particularly during the early and growth stages. Historically the MSMEs have relied on following sources for financing their needs.

Tab Capital

For MSMEs, TAB Capital provides a wide range of financial solutions based on their diversified business needs. It currently provides loan products like

• Machinery/ Equipment Loan,
• Merchant Cash Advance – Loan against POS Machine
• Working Capital Demand Loan – To meet the
working capital requirement of MSMEs
• Unsecured Business Loans – Multi Purpose Business
Loan to serve various financial requirements in the
MSME segment.
• Loan Against Property (Industrial/Commercial/

• Loan to Professionals (CA, CS, Doctors, Architect) The company is always on a hunt to design new products in order to cater to diversified needs. It also provides the facility to give top– up on the loans every 6 months or provide an extended line of credit for their customers.

Talking about the criteria, rules and guidelines to avail the capital CA Abhay Bhutada, Chairperson & MD, TAB Capital highlighted, “At TAB Capital, we focus on certain basic and important criteria like Age of applicant should be in between 21 – 55 years, Business vintage should be more than 2 years & business annual turnover should exceed 15 Lakhs which are imperative in providing the basic approval instead of getting into the hassles of the lengthy approval process”.

TAB Capital analyzes the credit worthiness of a business before approval of loan by understanding
below parameters. Business Model & Scalability, Debt/Equity of Business,Banking ,Digital & Cash Sales ,Social Check, Credit Bureau check (CIBIL, EQUIFAX, HIGHMARK, EXPERIAN),
Business Networth, Educational /Technical Qualification of Applicant TAB Capital offers multi-purpose Business Loans which is designed as per the business need of Micro, small & Medium Enterprises.

Machinery Loan

Machinery Loan is a tailored financial product which helps MSME’s to raise financefor new & old machinery to take care of expansion and production needs. TAB Capital Limited offers quick Machinery Loan for Micro, medium and small-scale manufacturing units which are in need for
urgent capital for buying and upgrading equipment and also for increasing overall productivity.

Unsecured Business Loan

TAB Capital committed to providing unsecured business loans for MSMEs. Every Business has three stages to follow: planning, implementation, and expansion before it attains the maturity of being called as a successful company, and for each stage, an entrepreneur needs financial independence.

“At TAB capital, we work towards providing the financial independence and our customize unsecured small business loan aims to provide the right answer to MSME’s financial problems based on their needs”, Abhay added.

Merchant Cash Advance is a unique offering from TAB Capital Limited which helps Retailers/Traders & Restaurant Owners to convert future POS card swipes into current cash flows.

Retailers, traders, and restaurant owners can avail Merchant Cash Advance, if they accept credit or debit card payment for the daily business transactions. Merchant Cash Advance for small businesses can be used for execution of various business activities and satisfy their short-term operational requirements.

Working Capital Demand Loan

We offer Working Capital Loan for MSMEsthat are tailored to their financial needs and help businesses grab opportunities, take care of immediate needs and also grow to greater heights. The Working Capital Demand Loan is designed impeccably for meeting all requirements right from Inventory Purchases, Equipment Needs, Marketing Opportunities, Short-term capital needs, And more!

Loan against Property

TAB Capital Limited Offers Loan against Property across residential/commercial/industrial properties and MSMEs can now get access to desired amount for taking care of Business goals. Instead of letting their property sit as a dead asset, they can tap into the unused value of the same to obtain swift funding.

Loan to Professional

TAB Capital Limited offers tailor made loans for professionals including chartered accountants, company secretaries, doctors, architects, consultants and other practicing professionals. These loans are aimed at helping professionals grow their practices, buy new properties for setting up offices, remodel and revamp existing offices and also for foraying into new business domains. These unique loans are offered with attractive rates of interest for greater convenience.

Who and How to get the loan?

A fundamental principle of TAB’s digital lending platform is that anyone with internet access can apply online for a loan and be assessed accordingly.

For MSMEs, the lending process can be a stringent task to follow, so TAB Capital have created a simple digital lending process where a customer can easily apply for a loan, upload required documents online & get disbursement in 2 working days after verification & assessment.

This process remodels the lengthy loan processes into a completely digital solution which is fast and customer-centric and hence beneficial to the borrower since it is automated and streamlined.

Incred Finance

InCred offers a wide suite of products designed with a sharp focus on meeting the varied needs of the SME industry. They offer short term working capital loans, invoice financing (45-60 days), and medium term unsecured loans (24-36 months) and long term secured term loans (up to 10 years).

Incred’s loan products are flexible and can be tailor-made to suit the unique requirements and business cycles of each borrower.  For example for IT supply chain product, company provide financing both against regular stock and sell model besides providing one-time financing for lumpy tender based business requirements.

Saurabh Jhalaria – CEO, SME Business, InCred said, “We strongly believe in bringing a human approach to lending. Delivery of a superior and seamless customer experience across all touch points is extremely critical for us.”

Talking about the parameters and criteria to get the finance, InCred understand that an inadequate credit footprint and dearth of information make it difficult for SMEs to get finance.

At InCred, company use machine learning based algorithmic underwriting process to assess the credit worthiness of select SMEs. Apart from traditional financial statement analysis, legal entity analysis, etc., credit assessment is linked to a variety of parameters such as banking habits of SMEs, their relationship with their customers and suppliers, industry pattern analysis and inputs from personal discussions about the future prospects of the business.

“At InCred, we believe in serving our customers at their points of need. We have our own direct sales team and a large channel partner network through which we are reaching out to our customers. Customers can also get in touch with us by applying on our website (www.incred.com) or through our contact center”, Saurabh added.

Capital Float

Capital Float is a digital financing platform that provides quick and easy capital to help SMEs fund rapid growth and achieve their next milestone. The company also manages India’s largest online lending marketplace, with leading banks and financial institutions participating as lenders.

The various financing options Capital Float provides are:

Pay Later: A collateral—Free credit facility that allows the borrower to make multiple drawdown within a credit limit. The borrower can make bullet repayments and reset the credit balance, making this a rolling loan facility. Interest is charged on the drawdown amounts and not on the entire credit limit. The unique product was created by Capital Float. We’ve partnered with several prominent companies in the travel segment for this product, such as VIA, Yatra and Goibibo and computer peripheral sellers such as Savex and Compuage. This unique product has enabled Capital Float to service Channel financing requirements across varied ecosystems like Travel, IT Peripherals, Mobile phone distribution.

Kirana Loans – Capital Float offers micro loans to Kirana store owners in India. These loans are disbursed in less than 90 seconds. These loans are completely paperless in nature and are digitally processed and disbursed to the borrower’s bank account. There is little to no human intervention, as even the underwriting is done by algorithms. We have partnered with the likes of PayTM, Payworld, Oxigen, ItzCash etc.to serve customers in the kirana segment. Watch this short video to know more about this product.

Online Seller Finance: The e-seller space is highly competitive and we understand the need for e-commerce sellers to be able to quickly replenish inventory, effectively manage logistics and tactfully handle customer expectations. The partnerships with India’s biggest e-commerce platforms helps online sellers access fast and flexible working capital loans to operate optimally. Borrowers can opt for fortnightly repayments, preventing the burden of paying larger sums at the end of every month. Capital Float has partnered with Amazon, Flipkart, Snapdeal, PayTM, Shopclues, eBay, Alibaba, etc.

Taxi Finance – Company offer among the lowest down-payment in the industry, helping cab drivers to own and drive their own taxi on taxi-aggregator platforms like Uber and Ola. These companies deduct the weekly installment from their driver’s earnings and transfer the amount to Capital Float, before remitting the earnings to the driver’s account. The weekly installments reduce the burden of heavy EMIs on the driver.

Merchant Cash Advance: Businesses are actively using card payment machines to offer convenience to their customers. Apart from being integral to in-store sales, these devices can also help merchants acquire working capital to execute and expand business operations. Merchants can receive finance up to 200% of their monthly sales from card swipes.

Invoice Finance: Invoices can be liquidated into funds that can be used to fuel business operations. Borrowers can manage their payment commitments better with our invoice financing option. Companies product converts invoices into money that can be immediately deployed to get their business going. Borrowers can opt for the one-time bullet repayment mode to suit their cash flows.

Term Finance: This typical, unsecured business loan and is relevant to B2B service providers, manufacturers and distributors. The loan tenure ranges between 6 months to 3 years, making it a relevant product for different types of businesses.

Loan from Banks

Talking about the same, SME’s have different kind of financing options as per their easy reach and compatibility. Raise Money through Banks Loans is one of the main sources of raising fund for the business. Public sector banks have been pioneers in providing financial assistance to several SME’s which can approach the banks for loans under various schemes. The bank provides two kinds of financing for businesses. One is working capital loan, and other is funding. Working Capital loan is the loan required to run one complete cycle of revenue generating operations, and the limit is usually decided by hypothecating stocks and debtors. Funding from bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.

Challenges for SME’s to get the Finance

  1. Traditional Lending in India for Micro, Small & Medium Enterprises (MSMEs) is a very tedious process that can stretch up to 2-3 months in duration.
  2. Also, the need for complicated documentation & collateral by banks/financial institutions is demanding especially at the stage of set up and business growth. Many entrepreneurs pledge their personal assets & borrow from family, friends and relatives instead of structural financial institutions.
  3. The high cost of interest is also a serious deterrent. It clearly cuts the competitiveness of the enterprise which is anyway trying to foothold in the beginning.
  4. Lack of proper guidance and lengthy paperwork adds to their difficulty to raise funds from Banks. Furthermore, there is fear of rejection, which carries a perceived stigma and may prevent a number of creditworthy borrowers from applying.

In the end, SME’s seeking funding options must have in place a team that is convinced that there is a need to consider seeking funding options, either for sustenance or growth. Additionally a good rating reflects an organization’s credit worthiness and that would help determine its probability of meeting financial obligations, be it debt servicing or equity allocation. All this would go a long way in helping SME’s get their required funding without much worry or hassle. They should improve their governance and risk management practices, maintain proper books of accounts, submit correct information to banks and all authorities, and make their operations more efficient and productive to get easier access to finance from banks and other investors. This way the SME’s would become more competitive and efficient and contribution further to the economic development of our country.

Ankit Parashar: