Unsecured business loans are loans which exist without collateral assets on the line. This is great for SMEs and start-ups because it gives them the required push. CapitalFloat, in particular, has unique benefits to offer.

Unsecured business loans are a great way to move forward in the business world. Below are a few common questions people have about these loans, and their answers.

What are unsecured business loans?

Unsecured business loans meaning is that money is lent to you without any collateral assets at stake.

Most loans work like this. Money is lent to a business, and they have to pay it back with interest within a stipulated time frame. Some asset (like a house) is kept as collateral. If the business defaults on these loans, the collateral asset is taken away by the lender.

But this is different. Unsecured business loan lenders give you money on the sole creditworthiness or reliability of the business which is asking for the money. These are also known as signature loans or personal loans.

What happens when you default an unsecured business loan?

The lender can sue the defaulter for the money owed (principal and interest) as well as additional penalties and costs as a punishment for defaulting on the loan.

What are the interest rates like on unsecured loans?

The unsecured business loan interest rates offered vary from bank to bank. However, some Non-Banking Finance Companies (NBFCs) also offer highly competitive interest rates.

An unsecured business loan interest rate comparison would show thatCapitalFloat offers attractive interest rates starting at 1.33{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} per month. Of course, this is a general figure. The amount of money lent varies depending on the type of loan.

What are the different types of unsecured business loans?

Loans, in general, are only usually distinguishable regarding purpose, interest rates, and length.

Specifically, we find that CapitalFloat offers three kinds of loans: term finance, invoice finance, and online seller finance.

How’s the Term Finance loan CapitalFloat offers?

The features are:

• You don’t have to give any prepayment charges.
• The tenure is flexible and ranges from 6 months to 3 years.
• The amount you want to borrow ranges from 1 lac to 50 lacs INR.

All these benefits are provided in exchange for really small unsecured business loan requirements like three years’ operational history, a 650+ CIBIL score, and an annual turnover of over one crore (or) impeccably audited financials.

It is important to note that other lenders often expect much more from you, especially regarding collateral.

What about the Online Seller loan?

This is most suitable for companies who are expanding their market sales or moving to new markets. Companies in transition to becoming something bigger.

• You can borrow for 90 to 180 days.
• The amount can range from INR 1 lac to 1 crore, depending on your needs. Also, it can be twice as high as the borrower’s monthly sales.
• The repayments have to be done fortnightly.

Aside from basic KYC expectations, all you have to show is one year of running a business, at least INR 25000 sales each quarter, and partnership vintage between 3-6 months at least.

Finally, what are invoice finance loans? Are they useful?

Invoice finance is loan that lenders like CapitalFloat give you on the basis of your invoice. That is, on the basis of how much money you expect to get from your customers.

The CapitalFloat invoice loans look as follows:

• You can borrow from 30 to 180 days.
• A maximum of 80{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the invoice value is lent, and this amount should be between 1 lac and one crore.
• You have the option of one-time bullet repayment.

Expectations from the borrower’s side are minimum two years of functioning business, vintage of over three months, and an annual turnover of over one crore.

Are unsecured business loans financially safe?

In short, yes. Especially, for small to medium businesses, unsecured loans can be helpful.

You have no collateral, fast funding, the flexibility of repayment (within reasonable limits), and high approval rates. Also in the unsecured business loan, bad credit isn’t that harmful because the lenders often believe in helping the business.

All of this is great for SMEs because it’s difficult to give valuable assets as collateral, and loans are crucial in expanding and improving business.

Further reading:

1. https://www.nationalfunding.com/unsecured-business-loans/
2. http://www.investopedia.com/terms/i/invoice-financing.asp
3. http://www.investopedia.com/terms/t/termloan.asp
4. http://smallbusiness.chron.com/happens-not-pay-business-loan-unsecured-1913.html
5. https://www.unitedcapitalsource.com/blog/what-makes-unsecured-business-loans-safe-for-your-small-business
6. https://www.kabbage.com/blog/unsecured-loans-what-to-watch-out-for/
7. http://www.greenpath.com/resources-tools/financial-library/loan-types/secured-vs-unsecured-loans
8. https://www.fundera.com/business-loans/guides/unsecured-business-loans
9. https://www.linkedin.com/pulse/what-makes-unsecured-business-loans-safe-your-small-jared-weitz
10. http://www.investopedia.com/terms/u/unsecuredloan.asp
11. http://www.financefitnesscoaching.com.au/business-loans.html

LSI Keywords: unsecured business loan lenders, unsecured business loan interest rates, unsecured business loan meaning, unsecured business loan bad credit, unsecured business loan interest rate comparison, unsecured business loan requirements

The revenue or fund that your business has to run the daily, weekly and monthly operations is called the working capital. This includes maintenance costs, rent, office materials and utilities.

The absence of a working capital causes a business to fail; hence it has an intricate relationship with the health of business.

Working capital is also scrutinised by investors to assess your company’s financial well-being. It also identifies the liquidity of the business, i.e., the ease with which the company’s assets can be sold to convert to cash.

Calculating Working Capital

Working capital for businesses can be found through a simple formula,

Working Capital = Current Assets – Current Liabilities

The amount of working capital of your business indicates your capability to pay off short-term debts and expenses on a daily basis. The higher the working capital, the healthier your business is. If your working capital is on the lower side, then you should reassess your commercial model and business strategy.

Working capital can also be found using a ratio,

Working Capital Ratio = Current Assets / Current Liabilities

If the working capital ratio you calculated is less than 1, then your liabilities exceed your assets. This negative working capital is a sign of an unhealthy business. However, if this ratio is a very high number, then your business has too much inventory or assets on hand. Some of these assets can be invested on a long-term basis to help the company grow.

The ideal working capital ratio varies based on the industry that your business services. But, if this value is on an average between 1.2 and 2.0, then your business is running on a healthy note.

Purpose of Working Capital Management

The principal objectives of working capital management are,

1. Ensuring the smooth operation of the working capital operating cycle

The operating cycle here is the business lifecycle in its entirety. This includes the acquisition of raw materials, smooth production processes and delivery of products. One of the main objectives of the concept is to ensure smoothness in end-to-end processes.

2. Reducing cost of capital

The amount that is spent on maintaining the working capital is called cost of capital. These costs need to be carefully monitored and managed.

3. Maximising returns on asset investments

The ROI on assets that are currently invested should be greater than the weighted average cost of capital to ensure that wealth is maximised.

Working Capital Management – Approaches

There are three strategies that are commonly employed for the management of working capital.

1. The Conservative Approach

As per this approach, in addition to the everlasting working capital, the variable working capital is also funded from long-term sources. This implies an increase in cost capital, but the risk of fluctuations in interest rates are lower.

2. The Aggressive Approach

In this strategy, the variable working capital, the whole or parts of the permanent working capital and, at times, the fixed assets are financed from short-term sources. The cost capital is hence decreased, resulting in maximum profits, but it holds significantly higher risks.

3. The Hedging Approach

The fixed assets and the stable working capital are funded from long-term resources, while the variable working capital is supplied from short-term sources. This ensures moderate risks and moderate profitability.

Importance of Working Capital to a Business

• Businesses with a lower working capital will enable shareholders to benefit from a higher return on every dollar invested.
• Appropriate working capital management will allow businesses to pay their short-term obligations on time and improve their credit profile and solvency.
• Working capital management drives the profitability of small businesses.
• Good working capital management allows businesses to allocate resources efficiently and improve liquidity.
• It also results in higher business valuation and favourable financing conditions.
• Businesses with good working capital management can ensure uninterrupted production and will be immune to peak demands. Studies have shown that they have a distinct competitive advantage in the industry.

LSI Keywords: Working Capital, Current Assets, Current Liabilities, Working Capital Management, Importance of Working Capital, returns on asset investments, working capital operating cycle

References

https://www.efinancemanagement.com/working-capital-financing/importance-of-working-capital-management

http://www.investopedia.com/ask/answers/100715/why-working-capital-management-important-company.asp

http://accountlearning.blogspot.in/2011/06/need-and-importance-of-working-capital.html

https://www.linkedin.com/pulse/importance-good-working-capital-management-business-fareed

https://www.kashoo.com/blog/what-is-working-capital-and-why-is-it-important

https://www.paychex.com/articles/finance/why-is-working-capital-important-for-business-success

http://smallbusiness.chron.com/importance-working-capital-management-avoiding-bankruptcy-39031.html

https://www.cleverism.com/working-capital-management-everything-need-know/

http://www.yourarticlelibrary.com/finance/importance-of-sufficient-working-capital/26225/