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5 questions to ask before you get an Unsecured Small Business Loan

Once you have decided to apply for a small business loan, it helps to have an understanding both of your circumstances as well as the business loan lender’s perspective. This will help to improve the odds of success, and apply for a loan type and amount that is suitable to both your needs and your capacity.

Here are 5 important questions you should ask and answer before you apply for an unsecured business loan:

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Fintech vs. Banking: Career Choices | DATAQUEST

 

Fintech firms have been generating a lot of interest among investors and borrowers. One aspect that perhaps has not received due attention is that of career prospects, especially relative to banking.

Fintech, as the term suggests, is a combination of technology and finance. This combination serves three purposes: a) it reduces cost of providing a service; and b) it widens the reach of the said service and c) provides a better customer experience. The primary categories of professionals a Fintech firm would attract are Information Technology, Risk, Finance, and due to high growth rates and customer orientation, Sales. There are compelling reasons for candidates from these fields to choose Fintech over Banks or NBFCs. Let us look at a few of these.

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The Most Important Metric Banks Look At For Your Business Loan

Banks & Financial Institutions consider various factors to assess your credit worthiness whenever you apply for a loan. Fixed Obligations to Interest Ratio (FOIR) is one of the most important elements of the credit appraisal process of any business or individual. This ratio helps in determining their loan eligibility by comparing the Current Fixed Obligations of the applicant to his/her Net Monthly Income.

The Current Fixed Obligations include all the fixed monthly obligations of the customer but exclude the statutory deductions such as monthly Provident Fund contributions, Insurance Premiums, Professional Tax, Charity, Recurring Deposits, etc., which in turn help in determining his/her maximum monthly repayment capacity.

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Operating Margin Explained. Ratio That Tells Your Business Apart

Every business has its own core activities which are referred to as the Operating Activities.

Operating Income or Operating Profit refers to the profit that a business has after paying for all its Operating Expenses that include raw material costs, employee costs and all other operating bills. It is the amount available to cover the Interest & Tax obligations of the business. The Operating Profit when divided by the Revenue from Operating Activities gives us Operating Margin or Operating Profit Margin. It is a type of Profitability Ratio which implies how much a company earns as profit for every rupee of its sales.

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Do you Understand Interest Coverage Ratio?

As a good financial management principle, it is always advisable to have an optimum mix of debt and equity to maximize your return on the capital invested into the business. Equity is the amount of capital invested by the owners of the business while debt consists of the business loans, mortgage loans availed from banks and financial institutions.

When one takes loans from banks, it has to service the debt by the regular principal and interest payments. So, indeed it makes sense to know how better placed you are in terms of servicing your debt obligations, especially the interest part.

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LoanFrame offers entire portfolio of SME loan products: Shailesh Jacob | SME Times

In an exclusive interview with SME Times, Shailesh Jacob, Founder & CEO of LoanFrame.com,  a fintech company that provides a comprehensive range of financing solutions to small and medium scale enterprises,  gives a thorough picture of the SME financing situation in the country.

He adds that India, compared to its global peers, has the most neglected SME sector, which is reeling under some major challenges such as lack of funds and higher interest rates, over-reliance of banks on large corporates as a customer base and demand of collateral by the financial institutions.

                                                                                                         Excerpts from the interview…

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Is Your Business Deploying Its Assets Efficiently?

Every business invests in several assets to earn income. These may include fixed assets which include immovable property and machinery or current assets which include inventory and other working capital requirements.

Asset Turnover Ratio determines how effectively a business is deploying its assets to generate revenue. In financial terms, Asset Turnover ratio is defined as the ratio of Net Revenue of the company to its Total assets (which comprises of both Fixed as well as Current assets).

Thus, Asset Turnover Ratio = Net Sales / Total Assets

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Does your Credit Mix impact your Credit Score?

Your credit score reflects your credit habits to your bankers and therefore it is indeed important for you to be concerned about your credit score. As such, people are now getting aware of the importance to review their credit reports regularly. Even the regulator, SEBI, has acknowledged the need to regularly monitor the credit reports and thereby calls for one free report on an annual basis by the credit information bureaus. Reviewing your credit report indeed helps your diagnose your credit health. While your repayment record largely impacts your credit score, there are other matters impacting your credit score too.

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5 Most Significant Benefits of GST for SMEs | TaxGuru

With all Central legislation in place and only State level ratification pending, the stage is set for GST implementation. The 1 July 2017 target also seems realistic given that the major hurdles have been crossed.

GST will throw up many opportunities and challenges, and SMEs will be impacted to a greater extent. Under current laws small manufacturers with turnover below Rs. 1.5 crores p.a. are exempt from duties under the SSI (Small Scale Industries) provision. The corresponding exemption threshold under GST is Rs 20 lacs. Moreover, certain categories of businesses will compulsorily have to register under GST irrespective of turnover levels. This means many businesses that hitherto did not have to worry about indirect tax compliance will have to rework their way of doing business. Since GST’s primary objective is to help consolidate and streamline the elaborate (and confusing) process of indirect taxation and make it easier to administer, it is only logical that a wider tax net will and should result.

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Understand These 3 Terms Before Applying for a Small Business Loan

Small business loans are a popular way of funding business expansions. The growing popularity has led to an expansion in the number of loan products that finance companies have to offer to suit various needs. Typically in the case of MSMEs, lenders prefer to sanction secured business loans. This is because of perceptions about track record, repayment ability, and credit-worthiness that may not always be completely accurate. Nonetheless, secured loans remain the most viable choice for small businesses in need of a company loan.

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