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Top Pros and Cons of Start-up Business Loans

An entrepreneur needs to acquire a decent amount of funds to improve their business’ condition in the long run and ensure its smooth functioning. One may turn towards the options of personal savings, Small Business Administration (SBA) loans, crowdfunding, business credit cards, or even relatives in order to acquire loans. But some entrepreneurs opt for small business loans to accelerate their business and widen their financial market. Like any business loan, loans for small businesses have numerous benefits. However, there are a few drawbacks to consider as well. Opting for a proper loan is extremely beneficial for your business, but you must also not forget that you have recently established it. The business lacks proper experience and will probably take time to gradually fit into the corporate world. You also need a longer duration to decide your business’s ultimate motives and the short and long-term funding you will require. [B-01] The Pros of Start-Up Loans While applying for a business loan, keeping all of its advantages set firmly in mind is essential. We have noted down a list of pros you must definitely consider before opting for a start-up loan to boost the success rate of your business. 1. Enough Funds to Start Your Business While starting a business, you will be in need of excessive working capital in order to meet the various expenses. This may include payroll, hiring, real estate, equipment expenses, and marketing costs. There may also be situations where you will be in need of more funds than the ones your family members can lend you. If that is the case, a business loan is sure to come in handy. You can always have a safety net of financial backup around you with this. 2. No Need to Give Up Ownership Opting for small business loans can prove to be more beneficial for an individual instead of seeking investor financing, as you would not have to give a part of your equity to the investor. With the option of applying for business loans, you will get to choose from a variety of potential partnerships too. 3. Set Up Business Credit Your business is bound to require enough credit facilities in order to be able to afford the various start-up expenses of the business. In order to get hold of such facilities, a business loan is the right choice. Having a strong credit base also provides better reliability options as a borrower and lowers the risk of investment as a lender. The Cons of Start-Up Loans Apart from considering the pros while applying for a business loan, it is crucial to get to know about its downsides too. 1. Difficult To Attain Qualification A business loan granted by the various financial institutions and Government corporations can be really convenient in bringing about a positive change to the business. But, to avail of such a loan, one has to submit their financial and other documents to the lender. The borrower will be required to submit their financial records, revenue earned, and credit history with a lot more documents. After careful screening, the borrower will be granted the loan once the lender approves everything. 2. Restriction Of Cash Flow After the process of start-up loan eligibility (once the borrower receives the loan amount), one has to make monthly payments to the lender in the form of interest and a part of the principal. If one fails to fulfill the payment criteria of such a loan, huge and irreparable damage can be caused to personal credit, leading to the downfall of the business. But making monthly payments to the loan provider can cause huge restrictions to the cash flow of your business. This can contribute to issues in the business’s cash flow statement. In order to get rid of this problem, the business must have access to accurate knowledge about the steady maintenance of the cash flow statement. 3. Lack Of Information About Loan Usage If a business loan is given to an experienced businessman with proper skills and knowledge, he will be able to determine its appropriate use. They will also be able to use it to their business’ benefit. But if a person is opting for a loan to start their business, they may be rather inexperienced in handling it. During the initial days of the business, your sole motives will be to attract customers and keep the business at a steady level. But over time, you shall discover the need to invest in other ventures to expand your franchise. This requires proper knowledge and experience, which start-up businesses’ may lack. [B-02] Opt For a Start-Up Business Loan Today! It is crucial to consider the various pros and cons before applying for a loan that is best suited for you. After having all the knowledge, you will need to choose small business loans, you will be ready to go for the healthiest one for your business. This will prevent your business from acquiring losses and will improve its chances of prosperity over the years.
08-11-2023
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Tips & Advice

The 6 Business Loan Documents You’ll Need to Apply

A business loan can help accelerate your business growth with no stoppage. It means that the business gets enough funds to back up its finances for the long run. As such, a guaranteed financial future for your business is locked up safely. But when you acquire this type of loan, you may be a bit confused about the loan documents you need to apply for. For this reason, you should read this article until the end. [B-01] It is prudent for you to qualify for a business loan. So, there are various documents you might need for this purpose. Anyone who fails to provide adequate and accurate information for these documents may not be eligible for this loan. So, if you do not wish for your business’s necessary funding to be cut off, it is best to stick to the protocols when applying for this loan. 1. Credit Report Whether you wish to obtain small business loans or ones on a large-scale, your business needs to prove its credibility as a loan payer. So, when you opt for a loan for your business, you might have to show the lender a credit report. This type of report includes all the mandatory details regarding your time paying back loans. Such an event renders it imperative for you to showcase a good credit report from your end. Doing so implies that your business is worth the loan it wishes to secure from the lender. However, if you have a poor credit report at this point, you might be wondering what will happen next. Do not worry. In many cases, your loan might not be denied. But the lender is likely to demand higher interest charges from you. In other cases, you might also need to provide collateral that will help make the business loan secure. 2. Bank Statements Lenders may also ask for your bank statements. This is important to prove your business’s credibility and improve the future cash flow expectations that you might want to secure from the same lender. Apart from this, if yours is a business with an actively generating revenue stream, the lender is more likely to approve your loan application. This means that such small considerations will only improve the business loan’s instant approval. Also, if your business is good at administering its expenses healthily, the lender will consider your business for quick loan approval. That is why focusing your attention on all these aspects of your brand is essential. 3. Tax Returns Any business that wishes to obtain a loan at the earliest must also display documentation of tax returns. This documentation will help the lender to analyze your business’s past performance. However, if your brand has recently launched, you might want to seek the assistance of your accountant. They will help you curate a projection that clearly specifies your tax returns and how they look in the coming years. You can also discuss MSME loans with them if you want valuable information on the same. Also, the next time you sit to file your tax, please consider maximizing deductions. However, you need to balance this out by keeping up with the image of your constant revenue generation. Since a lot of tax deductions can lead to many complications for your lender, you need to focus on balancing it properly for a quick business loan. 4. Income Statement The income statement is all about the cash flows that your business may have undergone in the previous years. Generally, this type of statement is classified into neat columns that feature expenses and business revenue. So, when you opt for a business loan, it can help potential lenders analyze your business’s overall performance in the past years. If your business is relatively new and your expenses have already surpassed your revenue, you need not be worried. Diverse forms of lenders continue to view your income statement for a comprehensive check before they process the loan. 5. Balance Sheet A balance sheet can be useful in many ways. For anyone who is looking for MSME loans must also fully focus on this. This type of sheet can help feature your business’s significant financial components such as equity source, liabilities, and even current assets. Accounts receivable are also taken into consideration via a balance sheet. This helps prospective lenders to understand the diverse components your business owns. As such, if they deem it fit, you might even have to pay off lower interest rates. [B-02] 6. Future Cash Flow and Budget Display When applying for a business loan, your lender may also be inquisitive to learn about how your business utilizes its finances. So, whether you buy real estate or you can afford payroll, the lender will want to inspect everything thoroughly. So, make sure you display one neatly that projects the exacting future cash flow and budget of your business as far as predictability.These business loans are significant for your business’s seamless future continuation without worrying about the funds. So, make sure you seek additional information about MSME loans and more to be thorough with everything.
08-11-2023
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How small business loan can help to grow your business

Starting a new business is always a risky proposition. There are so many things that can go wrong, and it can be difficult to get your business off the ground if you don’t have the right resources. That’s where a small business loan can come in handy. Small business loans can help you save your business, sustain it during tough times, or even grow it into something bigger and better! In this blog post, we will discuss how a small business loan can benefit your business. Let’s get started. [B-01] Reasons Why Business Owners Borrow Money To Grow Successful Business Taking out a loan to finance business growth can be a wise decision. With the extra capital, you’ll be able to invest in new products, open new locations, or hire additional staff. This will help increase revenue and grow your business. If you’re thinking about taking out a loan to grow your business, it’s important to understand the different new business loans available and how they can impact your business. There are many factors to consider before taking out a loan, so it’s important to do your research and work with a lender that you trust. To Maintain a Stable Business If you’re like most business owners, you didn’t get into the game to become rich overnight. You got into business to provide a product or service that you’re passionate about, and to make a comfortable living doing it. But in order to maintain your business and keep it stable, you need working capital. To Save a Struggling Business If your business is struggling to stay afloat, a small business loan can be a lifesaver. By consolidating your debts, you can reduce your monthly payments and free up cash flow to invest in new inventory or new marketing initiatives. A business loan can also help you pay off high-interest debt, which will save you money in the long run. General Rules to Follow After Taking a Loan Mentioned below are some of the general rules that you need to follow after you take a loan: Before Receiving the Cash, Prepare a 6-month Financial Prognosis It is important for you to create a financial prognosis for your business. This will help you track your expenses and income for the next six months. Doing this will also help you make changes to your budget if needed. It may also benefit you to create a personal budget for yourself as well. Make Sure you Have the Cash Flow to Make Repayments You need to be certain that you will be able to make the required loan repayments on time. To do this, you should keep track of your business expenses and income. This will help you predict how much money you will have available each month to make your loan repayments. If you are unsure about your ability to make repayments, it is best to speak with a financial advisor. Moreover, the debt consolidation loan in Mumbai will have lower interest rates which will make it easier for you to repay the amount. Stay Within Your Borrowing Limit It is important that you only borrow the amount of money that you need. Borrowing more money than you need may put unnecessary strain on your finances. Only take out a loan if you are confident that you will be able to repay it. Never Utilize a Corporate Loan to Settle a Personal Obligation This is one of the most common mistakes new business owners make. It can be tempting to dip into business funds to cover personal expenses, but it’s a dangerous move. Not only does it put your business in jeopardy, but it can also lead to legal trouble. Keep your personal and business finances separate to avoid any issues down the road. Apart from considering the business loan eligibility, you must also follow this general rule. Fight the Urge to Use a Business Loan to Finance Personal Items One of the most common mistakes new business owners make is using their loans for personal expenses. It can be tempting to use the extra money to buy a new car or take a luxurious vacation, but resist the urge! Remember, a business loan should only be used for business-related expenses. Otherwise, you could put your business in jeopardy if you’re unable to repay the loan. If you’re not sure whether an expense is considered business-related, ask yourself if it will help generate revenue or grow your business in some way. If the answer is no, then it’s probably not worth putting on your business loan application. Do Not Lessen Your Workload Once You Have Obtained Business Financing It is not uncommon for business owners to feel a false sense of security once they have been approved for new business financing. Many think that since they now have the funds they need, they can finally take it easy and let the money do all the work. However, this could not be further from the truth. In fact, it is now more important than ever to focus on your business and make sure you are using your new loan correctly. [B-02] The Bottom Line For many small business owners, taking out a loan is the best way to ensure that their business can survive – or even thrive. A small business loan can provide the funds necessary to sustain or grow your business, and it can be used for a variety of purposes. If you’re thinking about taking out a loan, be sure to consider all of your options and compare rates before making a decision.
08-11-2023
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Top 5 Most Common Challenges for MSME Business Loans

The sector of MSME (Micro, Small, and Medium Enterprises) is responsible for the growth and expansion of India’s economy. It is concerned greatly with contributing to the nation’s Gross Domestic Product (GDP), signifying its success. Providing employment opportunities to millions of people has been one of the primary motives of this sector. But the increasing popularity and resourcefulness of MSMEs also come with some major matters of concern. [B-01] The industry has little to no knowledge about its capabilities, which leads to a downfall in financing the business’ expansion. The introduction of various government policies and initiatives has still not been able to contribute to the growth of the nation. There are a lot of challenges that still pose a threat to the MSME sector. The global economic crisis has summoned the government to undertake support and assistance by introducing various programs. These programs, especially MSME Business loans, are helping a great deal in contributing to the growth of the nation. But this is still not enough, as the inconsistency of proper access to MSME loans has posed various challenges. The top five challenges an individual is likely to come across while opting for an MSME loan are: Lack Of Proper Financial Knowledge Many MSME business owners may lack accurate or up-to-date financial knowledge about the economy. This can lead to improper decisions being made, adversely affecting the business’s debt scores and operating costs. If a small business owner fails to possess proper knowledge about this field, they will not be able to get hold of the right lender. As a result, they will be forced to pay higher rates of interest on their small business loans, which is a loss overall. Their lack of proper knowledge and skills leaves them far behind in knowing about the latest technology lenders use. In this case, the entrepreneur will fail to choose the right framework while applying for an MSME business loan. Use Of Obsolete Technology A lack of knowledge will thereby lead businesses to not go hand-in-hand with the latest technology introduced. A lack of skilled staff with the proper expertise, especially in rural areas, will make it difficult to get access to a home loan too. People are also liable to face problems with the production and connection with new technologies as well as skills. This will hamper their ability to move forward and make timely purchases of online loans. Zero Confidence In Providing Loans The lack of confidence of banks in providing MSME loans can be a serious challenge for getting access to these loans. Banks ensure severe terms of eligibility and strict rules regarding criteria to provide MSME loans. These loans are considered to be high in risk since they do not bear any credit history. Many businesses often lack the proper skills to maintain proper credit rates. This prevents them from accessing an MSME loan on time. Also, banks tend to make the process of loan approval as long as possible. This usually makes small business owners reluctant to go for MSME loans. Also, it becomes difficult for small business owners to keep track of their credit history while managing other tasks. This serves as a barrier to getting approval for MSME loans, as it becomes tough to meet the harsh eligibility requirements set by the bank. So, the long process of opting for a business loan becomes difficult and stressful. Improper And Outdated Financial Solutions The older management systems of MSME make it difficult for small business owners to process timely funding of business loans. Also, there are many small business owners who take a step back from going for online loans. This is because they do not have the required level of knowledge and trust in advanced technology. As a result, they do not prefer going for online business transactions and thus, do not get access to advanced technology. No Collaterals For MSME Loans The strict requirements of collateral make it difficult for small business owners to get access to MSME loans. Since small businesses usually work for unsecured loans, they do not have to worry about depositing large collaterals. But an MSME loan strictly involves the policy collateral depositing to financial institutions or lenders. So, the small businesses may lack adequate materials and resources which can serve as collateral for loans. [B-02] The Bottom Line The MSME sector is quite beneficial for the growth and success of the nation. The various policies, programs, and initiatives do not step back from providing tremendous support to small business owners. But there are various challenges that the businesses face due to which they find it difficult to secure MSME loans. From lack of knowledge to outdated financial solutions, these problems must be rectified at the earliest to promote the smooth processing of loans.
08-11-2023
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Top tips on How to Avoid Defaulting on a Business Loan

If you’re a small business owner who took out a business loan, you must understand the risks involved in defaulting on that loan. When you take out a business loan, you essentially borrow money from a lender to finance your business operations. If you can’t make your monthly loan payments, you may risk defaulting on your loan. This can have serious consequences for your business, including damage to your credit score and even bankruptcy. In this blog post, we’ll discuss tips for avoiding defaulting on a business loan. Let’s take a look at these tips. [B-01] A Drop in CIBIL Score Your business loan repayment history is reported to the Credit Information Bureau (CIBIL), and any defaults will result in a drop in your CIBIL score. This will make it difficult to obtain loans in the future as lenders will view you as a high-risk borrower. To avoid this, make your loan repayments on time and in full. Additionally, you should try to negotiate with your lender for more flexible terms if you struggle to make payments. Many lenders are willing to work with borrowers who have difficulty making loan repayment. If you default on your business loan, it can have serious consequences for your business. Be sure to avoid defaulting on your loan by making timely payments and negotiating with your lender if you find yourself in difficulty. Doing so can protect your business and maintain a good relationship with your lender. Know Your Dates One of the most important things to remember when taking out a business loan is your repayment dates. Most loans will have a grace period, typically around 30 days, where you can make a late payment without being considered in default. However, if you miss this window of opportunity, you could be stuck with some hefty fees and penalties. To avoid this situation, keep track of all your loan payments and put them into your calendar as soon as you get the information. This way, you’ll always know when a payment is due and can plan accordingly. Another thing to remember is that some lenders may offer flexible repayment options depending on your business’s cash flow. If you’re having trouble making ends meet, reach out to your lender to see if they can work with you. Speak with Your Lender The most crucial step is to speak with your lender. Often, business owners are afraid to reach out to their lenders when they start having trouble making payments. However, lenders are usually willing to work with borrowers to find a solution that works for both parties. If you don’t communicate with your lender, they may assume that you’re not interested in repaying the loan and begin taking steps to collect the debt. Refinance One way to avoid defaulting on your business loan is to refinance the loan. This means taking out a new loan with different terms to pay off the original loan. You may be able to get a lower interest rate or extended repayment period, which can make it easier to make your payments on time. You will need good credit to qualify for a refinanced loan, so this option may not be available if you have already missed payments on your original loan. You can also negotiate with your lender. If you are having difficulty making your payments, make sure to work out a new repayment plan that is more affordable for you. This could involve extending the loan term, lowering the interest rate, or making smaller payments each month. Seek Legal Assistance If you’re struggling to repay your business loan, you may want to seek legal assistance. An attorney can help you understand your rights and options, and they may be able to negotiate with your lender on your behalf. You should also ensure that you’re familiar with the terms of your loan agreement so that you know what actions could lead to a default. For example, many small business loans require that the borrower maintain a certain level of business income; if your income falls below that threshold, you may be in default. Defaulting on a business loan can have serious consequences, so taking action as soon as possible is crucial if you’re having difficulty repaying your loan. With careful planning and assistance from an experienced attorney, you can avoid default and keep your business running smoothly. Rescheduling Your Debt One way to avoid business loan default is to reschedule your debt. This means working with your lender to develop a new repayment plan that better suits your current financial situation. Often, lenders are willing to work with borrowers struggling to make ends meet – after all, it’s in their best interest to get the money back that they loaned out. [B-02] The Bottom Line The best way to avoid defaulting on a business loan is to be proactive and plan. Understand the terms of your loan and make sure you can make the payments. If you struggle to make payments, reach out to your lender as soon as possible to discuss options. Defaulting on a business loan can have serious consequences, so it.
08-11-2023
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The Complete Process On How To Cancel A Cheque

You might have thought about what a cancelled cheque is or how to cancel a cheque. A cancelled cheque is the one that has been crossed across, filling the entire space in the middle, and the term “cancelled” is written on it. Apart from this, it would help if you wrote nothing on the cheque. However, few experts recommend writing a previous date earlier than three months. Suppose the cheque is cancelled on the 15th of September, 2022, then write the date as 15/04/2022. Or, to avoid the complex calculation of three months, write 15/09/2021 instead of 15/09/2022. Thus, it makes the cheque invalid for payment. [B-01] The detailed procedure by referring to the cancel cheque image The process of cheque cancellation is relatively more straightforward and doesn’t require your signature. A signature on a cheque could be the primary concern of the cheque issuer while submitting it to the bank. These cheques act as proof of one’s financial identity when borrowing loans, investing in the market, buying mutual funds, and so on. A signature on a cheque might bring trouble to the account holder. Therefore, do not sign a cancelled cheque if you want to avoid any problems. The cancel cheque image shows only two lines across the cheque with the word ‘cancelled’ between them. You can ask your friends to provide a sample of a cancelled cheque for your reference. Another way to look at a cancel cheque image is to ask the person seeking your cancelled cheque. Be it an insurance agent or finance company. This article further talks about what a cheque is, the types, and how to cancel a cheque. Keep scrolling to learn more. What is a cheque? A cheque is a negotiable instrument that comes under the Negotiable Instruments Act of 1881. It is a bill of exchange that is used for transferring the amount from the account of the person writing the cheque (the drawer) to the other person (the payee) through the bank. The credibility of a cheque The vital thing to be reminded of is that a cheque is credible or valid only for three months from the date the drawer issued the cheque. Characteristics of a cheque Some characteristics of a cheque must be kept in mind while issuing a cheque. Payable only on demand. Always made in cash or through an account transfer. Only drawn on a particular bank. Types of cheque The six types of cheques are: Bearer Cheque: This is a type of cheque encashed by the person carrying it. The bearer. Just the name of the bearer is verified, and the concerned bank makes the payment. Blank cheque: A blank cheque is a cheque that includes only the sign of the issuer. No date, money, or even the name to whom it is paid is written. This type of blank cheque involves a high risk if someone finds and misuses it. Order Cheque: These kinds of cheques are only cashed by the payee. Open Cheque: It is an uncrossed cheque that one can encash at any bank so that banks can make the payment to the person who bears the cheque. These can also be transferred from the original payee to a different payee. Crossed Cheque: These kinds of cheques are also known as the account payee cheque. In these cheques, the word “account payee” or “A/c payee” is written on the top left corner of the cheque, enclosed between two parallel lines. Payment for an account payee cheque is made only into the bank account of the person to whom the cheque is issued. The bank details should be mentioned afterwards. Thus, they prove to be the safest cheques to be issued. There is a clear track of who is receiving the payment and who is paying. Cancelled Cheque: A cancelled cheque has two crossed lines passing from the middle of the cheque and the word “cancelled” written. You may cancel a cheque if any mistake has been made while issuing it. Not sure how to cancel a cheque? Do not worry, we will discuss how to do it in detail. How to cancel a cheque? When you have to submit a cancelled cheque, you might feel this is a complicated process or be afraid to do so. However, that is a myth, and the truth is quite the opposite. There are many reasons for issuing a cancelled cheque, but the most common is when you apply for a loan, an EMI, or insurance. Apart from these, the EPF and other organisations also ask you to submit a cancelled cheque as a necessary document and other proofs. So the steps on how to cancel a cheque are given below: Take a new cheque that you want to cancel from your chequebook. Do not sign anywhere on it. Now, draw two parallel lines across the cheque. Lastly, write “CANCELLED” between those two lines made earlier in capital letters. Write the date mentioned at the start of this article as an extra security layer. i.e., the same day and month as today but the year to be the previous one. Points you need to keep in mind while cancelling a cheque It is essential to be careful while drawing parallel lines across the cheque so that it doesn’t cover any crucial details. Such as the account number, your name, IFSC code, MIRC code, bank branch address, etc. If you want to cancel the cheque due to an error you made, you could start the process from step 3. Do not sign the cheque. Inform the bank of the cheque number and mark it as cancelled. Purpose of cancelled cheques A cancelled cheque might not be used for withdrawing money, but there are many other purposes for which these are used. Some of those are listed below: Know your customer (KYC): Cancelled cheques can be held useful for identity proof purposes. Your cheque contains the name, account number, and bank branch address. Equated Monthly Installments (EMIs): Before enabling an individual to EMI options, a bank or a company concerned seeks a cancelled cheque. Only then are such monthly instalment options activated. Insurance Policies: Insurance companies ask for a cancelled cheque if you buy a policy for yourself or your family. [B-02] Conclusion A cancelled cheque contains your bank account number, your name as per the official bank records, the IFSC code, the MICR code, the name of the bank, etc. Yet, no one can use it for fraudulent purposes if you follow the tips provided by our experts. You are now aware of how to cancel a cheque and make it non-payable. Share this vital information with your friends and family. If you are looking for more details on bank-related stuff, approach a reliable source, which can be any financial institution such as Piramal Finance. A financial expert like Piramal Finance offers you accurate and authentic information on banks and their procedures. Visit us now!
08-11-2023
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Loan Against Property: How Can You Avail Tax Benefits From LAP? 

If you are planning to avail a Loan Against Property, you have to offer your property as collateral to the lender, starting with its inspection. The lender will then inspect your property and decide its value. Based on the value of your collateral property, you can obtain up to 70% or 80% of the value as a loan. The loan to property ratio will be decided by the lender too. Since LAP loans are secured, the interest rate is higher than that of MSME and SME loans. These loans are usually for a long-term, like a 20-year period. The tenure of the loan would also depend on your occupation. There is a chance that if you are self-employed, you will get a loan for a shorter period in comparison to the salaried workers. A Loan Against Property can be used for any purpose that you would prefer. It can also be seen as a personal loan but with collateral. The interest charged on personal loans is a lot higher than LAP due to the absence of collateral. However, you can enjoy certain tax benefits on the interest payments that you make for your LAP loan, not on the principal repayment. These tax benefits come with certain terms and conditions. [B-01] Tax Benefits In Case Of LAP 1. Exemption Under Section 37 (1) You can avail of tax deductions under this section if the money from the loan is used for business purposes. The benefits can be claimed on interest on loan paid, processing charges, documentation charges, and other business expenses. 2. Exemption Under Section 24 (B) This section is specifically designed for salaried individuals who have acquired LAP. If you have used this loan to finance another house property, you can claim a tax deduction under this section. The maximum amount that can be deducted is Rs.2,00,000, and the deductions can be applied only to the interest payments. When you are filing your Income Tax Returns, you will have to be prepared with the documents that will act as proof that the funds from the loan have been used to buy a property. Certain Cases With No Exemption Suppose you are using the LAP loan for any personal purposes such as your child’s education, your marriage, a vacation, or to pay any bills. In that case, you will not be eligible for deductions under any sections of the Income Tax Act. In case you are using the funds from the loan to transform and construct the respective property that you have given as collateral, you will not get any tax deductions on the interest repayment. Section 80C of the Act offers tax deductions in case of home loans, but if you have taken a Loan Against Property, you will not receive any benefits. This section is only meant for exemption on fully constructed properties. Features Of LAP Loans 1. Simple Documentation Process The documentation process is considered to be quick when it comes to sanctioning Loan Against Property. Since there is collateral included, the lender has to decide the loan to property ratio and give out the loan with minimal documentation. 2. Repayment Flexibility It will depend on your lender if they give you the time frame that you prefer for the repayment of the loan. The tenure can extend up to 20 years. Some lenders extend the option of choosing the frequency of payments. 3. Retained Ownership Even if you give your property collateral, the ownership remains with you. It is not possible to transfer the ownership to the lender. However, if you are unable to repay your LAP loan, you will have to let the lender obtain your property. 4. Pre-Closure Of The Loan If you are in a financial position to pay back the loan before time, you have the option. However, if your loan was at a fixed interest rate, you will have to pay a substantial amount as a penalty for closing the loan before time. This is not the case with loans at a variable interest rate. [B-02] Eligibility Criteria To Avail LAP The collateral property should be within the geographical boundaries of India. It can be a commercial or residential property. You should be a minimum of 25 years old and a maximum of 65 years old to get your LAP sanctioned. You have to be either salaried or self-employed with a minimum income of Rs.25,000 per month. The documents of the property should be legal and approved by the Government of India. Key TakeawaysWhen you apply for a Loan Against Property, know that there are no restrictions on the purpose you can utilize the funds for. You can obtain the loan from a Government bank or an NBFC as well. Since the loan is of a high amount, it usually takes 7-10 days to get it sanctioned.
08-11-2023
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Guide

What happens if you can not make your business loan payments?

With top lenders offering facilities like business loans instant approval, affordable interest rates, and so on, businesses can easily secure funding these days. However, uncertainties are part and parcel of running a business. So, paying loan instalments might not seem so easy when your business hits a low phase. What happens in such a situation? What can you do to recover? Here are the answers to all your questions. [B-01] What happens when you’re unable to make business loan payments? Missing a single payment or being late to pay is called loan delinquency. On the other hand, a loan in default is all about missing a number of payments over the course of time. But whether a loan is in default or delinquent is completely dependent on your lender’s policy. In any case, you might face the following consequences of not making business loan payments: Decrease in credit score When you miss the instalment on business loans, the lender duly reports it to the credit agencies. Thus, your business’ credit score drops, which makes it even more difficult for you to get loans in the future. Paying the penalty for the loan As you are unable to make the payments, the lender will charge a hefty penalty fee. In addition to that, they might even increase your rate of interest. This will make it even harder for you to make the payments. Foreclosure or legal action The further action taken by the lender depends on whether you have taken a secured or unsecured loan. In the case of a secured loan, such as a business loan against property, the lender has the right to take authority over your asset. If it is an unsecured loan, expect to be charged a late fee. You will find a more detailed description further down below. Regardless of what the consequences are, there are tough times when you have no way to make the payment right away. So, what to do in such a situation? What to do if you are about to miss a loan payment? Rather than surprising the lender with a missed payment, try to get them to help you. If you are sure that you won’t be able to make the next payment, get in touch with your lender and let them know. The lender of an online business loan might offer you a few solutions, such as: allowing you to make a partial payment for now renegotiation of the terms of the loan extending the due date of making payments without any penalty fee temporarily pausing payments to give your business the time to bounce back There is no reason to think that the lender is out to get you. Instead, be upfront and let them know the reason why you can’t make the payment. Your lender will help you find ways to get the loan payments right back on track as per the schedule. Not paying a secured loan vs. an unsecured loan: The consequences A secured business loan is something that you get by pledging a financial or physical asset as collateral like a savings account, your house, jewelry, and so on. But an unsecured loan does not have any collateral backing it up. So, if you default on a secured loan, the lender will seize the assets that you put up as collateral for that loan. If you had put up your house, the lender will take possession of that. In case you have pledged your business equipment, they will seize your equipment to recover their losses. For unsecured loans, lenders usually start by charging hefty penalty fees. When you do not pay that as well, they might decide to sue the business and collect the money. If they sue your business, they can seek compensation for a host of things, right from that outstanding balance to the penalty fee, interest, and so on. [B-02] Is it possible to recover from the business loan defaults? As more loan payments are missed, the lender naturally becomes increasingly aggressive in their collection effort. As mentioned before, they might be ready to negotiate a settlement to get their money back. But this should only be considered as a last resort. After all, the process of settlement means keeping you in financial distress for a longer duration. Of course, the credit score for the business has already taken a hit. The best thing you can do is to have a repayment plan in mind when you apply for a loan. In this plan, make room for emergencies and financial distress. What do you plan to do in case your business registers low revenue for some time and you still need to make loan payments? If you still face a time when you can’t make a payment, talk to the lender directly about it.
08-11-2023
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What Is Working Capital? Here’s Everything You Need to Know

Working capital is the lifeblood of any small business. When it’s working well, your business can thrive. But when it’s not, things can get tricky pretty quickly. If you’re looking for a way to make your working capital work for you, a working capital loan might be the answer. In this blog post, we’ll take a look at what a working capital loan is and how you can use it to your advantage. Let’s get started. [B-01] What is a Working Capital? A working capital loan is a loan used to finance a company’s day-to-day operations. The funds can be used for expenses such as inventory, payroll, and other operating costs. Working capital loans are typically short-term loans with terms of one year or less. The interest rates on these loans are usually higher than those on longer-term debt, such as term loans or lines of credit. There are many different types of working capital loans in India available to small businesses, each with its own set of terms and conditions. The most important thing to remember when considering a working capital loan is that it is a short-term loan. This means that the loan should be used for immediate needs and repaid as soon as possible. Working capital loans are not meant to be used for long-term projects or investments. How do we Acquire more Working Capital? There are a few key ways to acquire more working capital, whether through business loans or other methods. Here are a few key ways: 1. Improve Stock Management to Increase the Amount of Working Capital One method to increase working capital is by improving stock management. This can be achieved by streamlining the inventory process, reducing waste, and increasing the turnover of products. Another method to acquire more working capital is through business loans. In India, working capital loan interest rates are relatively low. Banks typically offer working capital loans at a lower rate than other small business loans, making them an attractive financing option for small businesses. Several government schemes provide funding for small businesses in India. 2. To Prevent Unwanted Surprises, Avoid Overtrading Overtrading is a common issue among business owners who don’t have enough working capital. You’re essentially borrowing money from your future sales to pay for current expenses when you overtrade. This can put your business in a precarious position and make it difficult to obtain additional financing down the road. To avoid overtrading, make sure you have a solid understanding of your working capital needs and take out a loan accordingly. You should also monitor your inventory levels carefully and only order what you need to meet customer demand. By taking these precautions, you can ensure that your business has the resources it needs to thrive. Working capital finance is provided against a wide range of collateral, including residential and commercial property, plant and machinery, stocks, shares, and other assets. Another way to make working capital work for you is to use it as collateral for a loan. If you have working capital available, you may be able to get a better interest rate on a loan or line of credit. This can save you money in the long run and help your business stay afloat during tough economic times. With a working capital loan, you can access the funds you need to cover day-to-day expenses and keep your business running smoothly. 3. Keep Control of your Business for Long-Term Success Working capital is the lifeblood of any business. It is the money that a business uses to pay for its day-to-day expenses, such as rent, inventory, salaries, and utilities. A working capital loan can give your business the financial boost it needs to grow and expand. But it’s important to keep control of your working capital to repay the loan and avoid any negative consequences on your long-term success. Here are a few tips to help you keep control of your working capital: Make sure you clearly understand your business’s financial situation: Know how much money you have coming in and going out each month. This will help you make smart decisions about using your working capital. Create a budget for your working capital expenses: Include everything from rent and inventory to salaries and marketing costs. This will help you stay on track and avoid overspending. Use accounting software to track your working capital expenses: This will give you real-time insights into where your money is going so that you can make adjustments as needed. Have regular conversations with your accountant or bookkeeper about your working capital: They can help you identify areas where you can save money or make changes to improve your financial situation. Working capital is an essential part of any business. 4. Free Up Capital by Addressing Short-Term Financing Issues Short-term financing issues can put a strain on your working capital. To free up capital, you need to address these issues head-on. Identify the source of the problem- Is it late payments from customers? High inventory levels? Slow sales? Once you know the root cause, you can develop a plan to fix it. Develop a system for tracking receivables. This will help you stay on top of who owes you money and when they’re supposed to pay. [B-02] The Bottom Line Small business owners need to be strategic when it comes to working capital. Taking on too much debt can be crippling, but having too little can limit growth potential. The key is to find the right balance for your business. Working capital loans can be a great way to finance short-term needs and manage cash flow. But it’s important to understand the terms and conditions before signing on the dotted line. Make sure you compare interest rates, repayment terms, and fees from multiple lenders before deciding.
08-11-2023
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