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11 ways to refinance your business- The Art of Fund raising

CA JATIN RATHOR 
on 05 June 2020

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ART OF FUND RAISING

  • Business profile should be sound.
  • CIBIL Record should be good
  • Documentation should be complete.
  • Project Report/Projections should be sound.
  • Bank transactions should be frequent with constant inflows.
  • Cheque should not be bounced in past 3 months period.
  • ITR should be filed in timely manner with a minimum gap of six months between years.

10 POSSIBLE WAYS OF REFINANCING YOUR BUSINESS

1. SELF FUNDING & REBOOTING YOUR BUSINESS:-

  • Using own savings fund
  • Borrowing from relatives
  • Borrowing from friends
  • Sale of unused business assets as it can be purchased later post financial crisis.
  • Sales of personal jewellery or taking loan against it
11 ways to refinance your business

2. LOAN AGAINST FDS/ TERM DEPOSITS/ PPF/MUTUAL FUNDS

This could be a cost borrowing options as many banks offer overdraft against Fixed deposits, Term Loans, Mutual funds , securities, PF etc.

Generally rate of interest of such borrowing is just 2 % higher than interest earned on such deposits.

3. AUTOMATIC LOAN TRANSFER SCHEME OF GOVERNMENT: (latest)

'3 lakh cores - Collateral Free Automatic Loans for businesses'

WHO CAN AVAIL MSME LOAN?

All those registered under MSME -  Manufacturers & Service Providers (Proprietorship/ partnership/Ltd/LLP) and who has MSME Registration can avail the automatic loan transfer of 20% of outstanding loan as on 29/02/2020 subject to below conditions:

  1. Already having a running loan whose o/s credit is less than 25 crore as on 29/02/2020.
  2. Turnover in FYR 19-20 is less than 100 crores.
  3. Gst registered or no- GST applicability certificate.
  4. Registered under MSME.
 

ARE TRADERS ALSO ELIGIBLE FOR AUTOMATIC LOAN TRANSFER SCHEME?

Yes, Traders & wholesalers are also included under this scheme.

AS PER NCGTC Statement and latest clarification they are ready to give guarantee for loans to traders community also subject to below conditions:

  1. Already having a running loan whose o/s credit is less than 25 crores as on 29/02/2020
  2. Turnover in FYR 19-20 is less than 100 crores
  3. Gst registered or no gst applicability certificate.

WHAT IS RATE OF INTEREST UNDER AUTOMATIC LOAN TRANSFER SCHEME?

Rate of interest shall vary from 9.5% to 15 %.

IS UDYOG ADHAR REGISTRATION SAME AS MSME REGISTRATION?

Yes, the certificate of Udyog Aadhaar is a valid MSME Registration

4. Fund raising through Overdraft facility or Loan against the stock in trade from banks.

5.  Overdraft facility or Loan against the Book Debtors from banks.

6. Business Loans can be applied from Micro-finance Providers and NBFCs.

7. Business Credit Card Applications for short term relief.

 

8. Sale a part of business unit: - with proper cost benefit analysis a part of the business unit may be sold out to infuse fund into the business.

9. Venture capital financing option.

10. Government Programs and financial aid packages: - keeping close eyes on government announcements aids packages to help the MSME sector.

11.  Request for Advance payment from potential customers to meet the working capital deficiency for the service to be provided or sales to be made.

CA. Jatin Rathor is the founder and in-charge of the Firm Jatin Rathor & Associates. He has an all round experience of more than 15+ years in the field of Statutory Audits, Taxation, Management Consultancy, Internal Audits & Systems Study, Tax Audits and Project Financing.


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