The onset of COVID-19 handicapped almost all the economies across the globe. Lockdown seemed to be the only way out but it had its negative impact on businesses, the worst hit being small business owners who are now struggling to keep alive post lockdown. According to a report of National Federation of Independent Business (NFIB), only five percent of small business owners claimed to come out of this lockdown unscathed. The rest, i.e., almost ninety two percent said their businesses are facing adverse consequences of lockdown and hence they are facing a very tough time for survival.
As restrictions are being lifted off, it is but natural that everyone is expecting a robust market future post COVID-19 lockdown. Though no one had ever imagined the present rough scenario, yet many are of the opinion that it is not an impossible situation to resolve, if handled tactfully. The period of lockdown has taught each one of us some significant business lessons which can definitely help us not only in surviving but also prosper and thereby prepare us for any further potential crisis.
The months following last year’s Covid-19 outbreak have drastically transformed the world forever. However, almost months later, we are still in the process of learning, evolving and adapting ourselves to the present situation. Although the time that all are facing is very stressful, yet it has been a period when large entrepreneurs and businesses have joined hands to show innovation and incredible determination. And this is equally true for the small business entities as well. In order to survive and revive the small business owners have to follow some rules that are listed below.
Evaluating the overall Financial Damage
The initial step in preparing a rehabilitation plan post COVID-19 period for business owners is to assess the effects on your small business or company.
Various steps are involved, to start with the hard numbers. First you have to revise your financial statements — like actual profit and loss or in other words cash flow statements. The next step is comparing it to last year’s financial figures and see how your company stands today.
Besides the tough figures for profits, sales and cash flow, you have to assess other ways that your company or business has been affected. For instance, if you have cut off your number of employees and also, if you have curtailed your promotion or advertisement budget for some of your customers who have switched to your rivals because you have to compensate for that when financial capital is needed to revive.
Re-evaluate the present business plan
It is the need of the hour to re-evaluate your business plans you made prior to COVID outbreak, based on the then prevalent risks, financial evaluation and turnaround strategy. When re-examining the present situation, you have to define once again your corporate strategy and now prepare a more detailed and practical growth strategy which can be implemented immediately. All members whether be they senior staff, senior employees or external investors – must be involved at this point and fix a mutually agreed set of new targets. On the basis of the company’s present financial situation, the change has to be in the monthly, weekly, quarterly, or annual growth strategies that incorporate funding postponements. One can also opt for boosting PE investment or even entering into new commercial partnerships /collaborations that can assist in achieving renewed business targets and objectives.
Opening up New Sales Channels
Many companies have learnt from the significant lockdowns that in fact, multiple distribution channels are the need of the hour and hence they are fundamentally important. With forced quarantines and long lockdowns in force for months and months, companies with few channels are left with little or no revenue at all across the country.
Revamping Your Budget to Accommodate New Spending
If you own a small business you must have understood by now that at this juncture you will have to pump a good amount of money in your venture so that you stay afloat in the backdrop of the present scenario before you can make sustainable profits.
For example, you may have to spend some money on training and recruiting or hire new staff. In addition, you will have to buy an inventory, and you shall have to update your budget for promoting your products by creating a new mood in the market.
As part of your business’s revival, you need to have a good overview of what you have to budget for besides what you can cut to save expenditure and thereby increase your profits. Your sole aim should be to reduce unnecessary expenses and maximise your operating budget so that you can take maximum advantage of the opportunity to soundly invest in growth.
Venture into New Arena
Going forward, foolproof planning and savings for the unexpected future will be the vital key to economic recovery. Entrepreneurs need to learn how to increase their savings so that they can easily stay afloat during any unforeseen financial distress and unexpected emergencies like Covid-19 pandemic,etc. To meet this end, small businesses are carrying out their financial health checks each quarter, which is assisting them in meeting their growth targets and optimising their present working capital.
Unique and out-of-the-box new ideas and at the same time exploring untapped and niche sectors will be the next important step for small-sized businesses to revive and survive. In the ‘new normal’, various small businesses are centering themselves into new arenas such as fintech, technology services, healthcare, education and more. The pandemic lockdowns have made all small business owners realize that at this point adding new verticals is very crucial to aid in sustaining operations in the long run.
The small businesses have to be adaptive and agile to give themselves a competitive edge and all this can be done only if one has a good amount of capital in one’s hand. Here companies like LendingKart come to their rescue by providing them business loans at nominal interest.
|Loan type||Amount size||Processing fee||Tenure period||Interest rates|
|Collateral free business loan||Starting from Rs. 50000 up to 2 Crore||1-2%||Up to 36 months||16%-27% per year|
Types of Business loans:
One cannot follow “the one size fits all“approach when it comes to getting business loans. There are various types of SME loans in the market that can cater to meet the specific aim of the business. Let us discuss the various types of business loans that are available in today’s market for the small entrepreneurs.
Below is given the list of different types of business loans for SMEs in India.
- Equipment loans
- Term loans
- Short Term loans
- Invoice finance/loan on receivables
- Supplier credit
- Bank overdraft or Line of credit
Short term loan:
- Working capital loan or a short term loan is meant for taking care of the day to day operations necessary for smooth running of the business.
- This loan serves the purpose of infusing liquidity back into the business and therefore helps in minimising cash crisis or irregular flow of cash. Working capital is very important in order to keep the day to day business rolling.
- The tenure of the loan may range from three to eighteen months as the case may be and we, at LendingKart, provide short term loans for a span of one to twenty four months to make it favourable for SMEs.
- Loans with higher amounts taken with a specific purpose like capital expenditure of the business are called term loans are long term loans that serve the purpose of meeting the capital expenses of the business.
- This loan’s tenure ranges from five to twenty years and it is collateral. This type of loans may have floating or fixed rate of interest depending on the client’s choice.
- The type of loans that assist SMEs to buy new equipment, machinery, etc or upgrade the present one’s are called equipment loans.This loan is generally taken by traders, manufacturers and service providers who are involved in the industrial units. This loan is secured wherein the lender has the rights over the machinery if the borrower becomes defaulter.
- Equipment loan’s tenure ranges from one to three years and a maximum of Rs.2 crores can be taken under this category of loan.
- If you want to use the quickest way to pump cash into your business you can do so through invoice financing by using the invoices that are outstanding.
- Under this process the loan is secured against the pending bills and the tenure of the loan equals the due date of invoices.
- The amount given as debt by the finance company is normally 80% of the total invoice value.
- Invoice financing is a method of infusing cash flow into the business instantly as you do not have to wait for the customer to pay the invoice amount
- Bank overdraft, that is called a Credit line, is a type of revolving credit facility in which one can withdraw from one’s business account of the bank, an amount up to a sanctioned limit, even without a necessary balance in the account.
- This is a method of by-passing the complete loan application process in order to get instant money into the business.
- In Overdraft facility, you have to pay only the charges for the total amount of money that is used for a particular period. The good point about it is the fact that once you repay the amount, the loan is restored back to the previous limit, to be taken as and when the need arises.
- Trade credit, also called supplier’s credit, is a facility of credit provided to the buyer by the supplier of goods.
- The supplier sells his goods to you on credit and allows you to pay later.
- If you do not pay the money in time, you may have to pay a higher amount that includes interest for the delay for the same purchases.
Which companies provide small business loans in India?
Having discussed the prevalent types of business loans for small businesses popular today, let us mention all the financial institutions that sanction small business loans. Generally, government institutions, banks and NBFCs including online lenders are actively involved in providing loans to the SME segment to meet their working capital needs. However, bank loans are time consuming and involve huge amounts of paperwork. Online lenders like Lending Kart have brought about a revolutionary change in the lending space by inculcating advanced technology tools like Analytics and AI.
Why is LendingKart the most appropriate choice for SME business loans?
LendingKart’s focus is exclusively on facilitating business loans to the entire SME sector because they have a deep understanding of financial needs and working structure of SMEs. Their main features are-
- Very less documentation
- flexible options on EMI
- fast processing time
- competitive interest rate
- no charges for prepayment
- Online facility for loan application
Small businesses and Entrepreneurs comprise a major chunk of essential contribution to the nation’s GDP and hence their recovery revival and recovery is very essential for economic progress of India. Undoubtedly the year 2021 will only be just a time when SMEs bounce back from the pandemic’s after-effects, but will also be a significant time for largely shaping entrepreneurship and innovation for the coming decade.
1. Why do I require a business loan?
Maintaining a constant cash flow in your business is very significant in order to run the business operations smoothly and the business loan is an easy way to pump the required liquidity into your business.
2. How can I best use the business loan amount?
Business loans can be used best for different short term business purposes like purchase of inventory, equipment, etc. besides working capital management.
3. What is the criteria to be eligible to secure a business loan?
A running business that has been operating for more than last 6 months and having a specified turnover is eligible to get a small business loan.
4. What is the minimum approval time for a business loan?
Approval for a business loan in banks may normally take about fifteen days or more but LendingKart has a reputation of approving loans within 3 working days if the applicant meet the eligibility criteria and gives all the necessary documents.
5. Is the option of pre-closure allowed in all business loans?
Yes, pre-closure of loans is allowed, but with a minimum prepayment cost. On the contrary LendingKart is known for not charging anything extra for pre-closure of a loan.
6. Can I apply for a second time for a small business loan again for my business needs?
Yes, you can get a business loan again and again, but only after repayment of the previous loan.
7. Who are eligible for a business loan in India?
Entities like self-employed professionals, and self-employed non-professionals are eligible for a business loan in India. If they fulfill the mandatory eligibility criteria, they can apply for the online business loan to get funds.
8. How much good credit score must I have to get a business loan for my new business?
A CIBIL score of 685 or beyond is considered healthy to secure a business loan. As your score inches closer and closer to 900, your chances of getting small business loans increases.
9. How can I qualify for a business loan?
If you meet the following criteria, you can qualify for a business loan:
- Minimum of three years of business vintage
- Your age should be within 25 to 65 years
- A 685+ CIBIL score and a strong credit profile.
10. How can I apply for a business loan?
The procedure to apply for a business loan is as follows:
- Filling the online application form for a business loan.
- Submitting all the required documents to complete the process.
- If you complete the above two criteria, your bank account will receive the loan amount within 24 hours.
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