Financing needs for a small period normally less than a year is known as Short term finance. It is also known as working capital financing. Due to uneven flow of cash into business or the seasonal pattern of business etc leads to requirement of short term finance.
One business get establishment, funds are required to meet its day to day expenses. Like raw materials must be purchased at regular intervals, workers must be paid wages regularly, water and power charges have to be paid regularly. To meet these expenses there is need of liquid cash, for financing such requirements short-term funds are needed. Inadequacy of short-term funds may even lead to closure of business.
Sources of short term finance:
1. Trade Credit
- Credit granted to manufactures and traders by the suppliers of raw material, finished goods, components, etc. In general business enterprises buy supplies on a 30 to 90 days credit, this means that the goods are delivered but payments are not made until the expiry of period of credit. This type of credit facilitates purchases without making immediate payment. This is quite a popular source of finance.
2. Bank Credit
- Bank credit is short term loan which is provided by bank to business entity. Under this scheme credit is granted, the borrower gets a right to draw the amount of credit at one time or in instalments as and when needed. Bank credit may be granted by way of loans, cash credit, overdraft and discounted bills.
When a particular amount is advance by bank which is repayable after certain time period i known as bank loan.
II. Cash Credit
An arrangement whereby banks allow the borrower to withdraw money upto a specified limit, this limit is known as cash credit limit.
III. Over Draft
When a depositor withdraw money in excess of the balance in his account upto a specified limit, provided by bank is known as overdraft facility.
IV. Discounting of bills
When bank advances money by discounting bills of exchange, promissory notes and hundies. These documents are presented before the bank for discounting, banks credit the amount to costomer’s account after deducting discount.
3. Customers’ Advances
Sometimes businessmen insist on their customers to make some advance payment. It is generally asked when the value of order is quite large or things ordered are very costly. Customers’ advance represents a part of the payment towards price on the product (s) which will be delivered at a later date
4. Instalment credit
Under this type scheme only small amount of money is paid at the time of delivery of article and rest of amount is fixed on instalment. Now a days it is becoming more popular source of financing for consumer goods like television, refrigerator as well as industrial goods.
Financing are categorised on fund based financing and non-fund based financing
Fund Based Financing
Financial service involves credit offered by banks in the form of loans, overdrafts and other cash transactions.
Non-Fund Based financing:
In a non-fund based financial service the bank does not deal with funds or cash transactions. Some examples of this type of service are bonds, letters of guarantee and letters of credit.
In today’s scenario there are plethora of options are available for SMEs to get finance from various financial institutions. It is most important to choose your financial institution carefully, so that your business gets finance at low interest.
Of all choices available you usually get stuck between a bank or NBFC.
NBFC is a financial institution which provides financial service without holding banking license. NBFC are registered under companies act and regulated by RBI.
While a bank is a financial institution that accepts deposits from the public and creates credit. Banks can perform lending activities either directly or indirectly through capital markets.
The functions of NBFCs are limited to the extent that they can accept/renew public deposits for a minimum period of 1 year to 5 years. The maximum interest rate an NBFC can offer is 12.5%. Also, keep in mind that the RBI doesn’t guarantee the repayment of deposits by NBFCs, unlike banks. Since NBFCs doesn’t form a part of the payment and settlement system, it cannot issue a cheque to its customers.
Bank loans are typically linked to the MCLR, the minimum interest rate below which a bank is not permitted to lend.
NBFCs offer loans based on the prime lending rate (PLR) which is not regulated by RBI.
NBFCs get an edge over banks who can’t lend below MCLR slab
Banks don’t fund the entire credit requirement and fund only a certain portion and the rest has to be paid by the borrower.
Since it is not regulated as tightly as banks, NBFCs can sanction amount higher than banks.
banks can be stringent when it comes to approval of the documents, it indulge more paper work and long approval process
less documentation and paperwork
Bank provide loan or finance to those who have good credit score
NBFCs may offer and accept SME business loan even if the credit score is not too good.
How to get Short Term Finance?
Connect With Corpseed
Connect with the team corpseed to discuss specific requirements for your business at IVR: +91 7558 640 644 or email@example.com. It takes 20-25 minutes to discuss requirement.
Once you discuss the requirement, we will align a dedicated Account managers are here to help understand your business and provide best solutions and assist you with the entire process.
Real Time Update
Use our platform to track progress of application and many more. Always know what is going on with your application, what is in progress, and what is done.
Once job is completed, you will receive documents directly to your email ID and at your doorstep along with 30 days payback guarantee incase not satisfied with the services.
At Corpseed, we are committed to offer our services to the entrepreneurs and businesses as a very cost-effective proposition. We believe that a customer is always right and the focus of any business activity should be to serve the customer with utmost loyalty. All our services come with SLAs (Service Level Agreements) for on-time service delivery and money back guarantee to ensure high level of customer satisfaction.
At Corpseed, our valued customers are always kept in the loop as far as service delivery timeline is concerned and we inform our customers every time a milestone is achieved during each stage of service request processing. But we also believe that we may come across a customer who is not satisfied with our efforts. For that we have a very responsive Customer Care Department which work 24x7 to attend to and solve customer complaints. We also have a money back guarantee for those, who want their service charges to be refunded.
At Corpseed, We believe it is our responsibility to protect our customer information from unauthorized access. We have put systems and processes in place to make sure that the customer information is safe with us during its storage and transfer between in house and third party servers. We continuously test our systems and processes for security breach and vulnerabilities are identified and fixed at a regular basis.
If a customer is not satisfied with the service we provided and if he contacts our customer care helpline and files a formal complaint within 15 days of service delivery date, Corpseed would refund the entire or partial amount of Professional Fee charged for that particular service.
If a customer is having issues with our service delivery process, he has various alternatives available at his disposal to register his grievance with us. He can either email his complaint at firstname.lastname@example.org or he can call our 24x7 Customer Care Helpline. Also, any customer is always welcome to visit our office to lodge a complaint with the senior management.
A customer can buy our services directly from our online platform, for which he need to make online payment. Once he clicks on "Apply Now", a new window will open, a customer is required to submit the information in the respective fields and click "Make Payment". A unique ticket number will be auto generated, the customer need to quote this number as reference for any enquiry regarding his service request.
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