Of the different categories of loans that can be drawn by companies, an unsecured loan can often prove to be the best option, thanks to the flexibility and quick turnaround time it offers. In this article, we will look at the pros and cons of unsecured loans.
Continue reading “Pros and Cons of Unsecured Business Loans”
For Shailesh Jacob, co-founder of the Gurgaon-based Loan Frame, starting a lending marketplace for SMEs was more than a big opportunity — it was also about contributing to the overall economy. According to the Ministry of MSMEs, the sector contributes around 38% to the GDP and provides the largest share of employment, after agriculture. “In India you have over 50 million SMEs and credit penetration is less than 10%,” Jacob points out. In August 2015, he launched Loan Frame partnering with around 20 lenders.
For any business in general, and for small and medium businesses, finance is one of the most important aspects under perpetual consideration. After all, money is vital to keep the wheel turning and for the day to day operations to take place without any issues. While large businesses have multiple ways to keep the lights on, small businesses must often rely on loans to take them through lean times, or when money is needed for business operations.
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For the past 50 years, small and medium-sized enterprises (SMEs) and micro, small and medium enterprises (MSMEs) have powered India’s economy, especially in rural and semi-urban areas. But they often fail to get adequate financial support from government agencies, banks and financial institutions, according to the SME Chamber of India.
India’s booming fintech market could be their savior.
Continue reading “Why Fintech Startups Are Wooing India’s Small Businesses | Forbes”
Rising non-performing assets (NPAs), overleveraged large companies and the general unwillingness of banks to lend money has meant small businesses are now finding it next to impossible to raise money. As loan portfolios sour, banks do not want to take the risk of lending to an SME.
Coupled with that is the fact that a large number of small businesses have no access to formal sources of finance, are under banked or have little or no credit history. For these businesses, there is no chance of getting a bank loan. It is with this understanding that a troika of entrepreneurs banded together to start Loan Frame.
Whenever an SME (Small And Medium-Sized Enterprises) business wants to get business loans, it can get very frustrating because most of the qualities required to get the loan are structured with big businesses in mind. This is understandable because financial institutions would like to plug into developing companies but they do not want to bear a large proportion of the risk that comes with this move. It is, therefore, a common trend that SME businesses in India have limited options when it comes to capital financing. However, this is not only particular to India as developing countries also face these impediments.
A credit score is a major deciding factor for banks to grant you loans and also to decide the terms and conditions on which the loans are to be given. Banks prefer borrowers with low outstanding balances, long credit history and high credit score. A good credit profile and high credit score are viewed positively by lenders. It also puts the borrowers in a position to bargain for better terms and conditions and draw loans at best available rates. On the other hand, it might get difficult to even get loans with poor credit score, leave aside the question of interest rates. Hence, it can be rightly said, “better the credit score, better the interest rates”.
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The performance of the business can be evaluated by having an insight into its financials. To build up a strong credibility before its lenders, a business must strengthen its financial ratios. The financial ratios can be classified into four main categories, namely, liquidity ratios, profitability ratios, solvency ratios and activity ratios. Activity ratios are the financial tools that are used to evaluate the ability of the firm to convert its assets into cash or cash equivalents. One such important ratio is Receivables Turnover ratio.
Your credit score is the mirror to your lenders in terms of your repayment habits and to some extent, your reliance on debts. Thus, it is important for you to have a good credit score. Reviewing your credit report indeed helps you understand your credit health but understanding what is impacting your credit score is also important.
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.
Continue reading “Understand These 3 Terms Before Applying for a Small Business Loan”
