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In the dynamic landscape of Indian business, managing cash flow effectively is paramount to sustained growth. Whether it is seizing a fleeting opportunity, navigating seasonal fluctuations or addressing unexpected expenses, quick access to funds can make all the difference. This is where short-term finance steps in, offering a crucial lifeline for businesses of all sizes.
At Praman Advisors Private Limited, we understand the urgent and varied financial needs of businesses. We leverage cutting-edge technology and a team of dedicated professionals to provide intelligent and streamlined short-term finance solutions, designed to empower your organization with the financial agility it needs to thrive.
1. Overview: What is Short-Term Finance?
Short-term finance refers to debt financing with a repayment period typically ranging from a few days to 12 months. Unlike long-term loans designed for substantial investments like property or machinery, short-term finance is ideal for meeting immediate operational needs and working capital requirements. It acts as a quick guide for funds to bridge temporary gaps in your cash flow.
Common scenarios where short-term finance proves invaluable include:-
• Meeting payroll: Ensuring your employees are paid on time, especially during lean periods.
• Inventory purchases: Stocking up on goods to meet sudden demand or seasonal spikes.
• Managing unexpected expenses: Covering unforeseen repairs, urgent marketing campaigns, or equipment breakdowns.
• Bridging receivable gaps: Tiding over periods when payments from clients are delayed.
• Capitalizing on discounts: Taking advantage of early payment discounts from suppliers.
Opting for short-term finance through Praman Advisors offers a multitude of advantages for your business:-
• Quick Access to Funds: Our streamlined processes ensure faster approval and disbursement, allowing you to address urgent financial needs promptly.
• Flexibility in Use: Unlike rigid long-term loans, short-term finance provides the freedom to use funds for various immediate business requirements from operational expenses to sudden growth opportunities.
• Easier Qualification: Compared to traditional long-term loans, short-term financing often has simplified eligibility criteria, making it more accessible for small and medium-sized businesses (SMBs) with limited credit history.
• Improved Cash Flow Management: By addressing temporary liquidity shortages, short-term finance helps maintain healthy cash flow, preventing disruptions to your operations.
• Opportunity Seizing: It enables you to quickly capitalize on business opportunities that require immediate capital, such as bulk purchase discounts or rapid market expansion.
• Building Credit History: Timely repayment of short-term finance can positively impact your business's credit score, paving the way for better financing terms in the future.
• No Long-Term Commitment: The short repayment tenure means you are not burdened with prolonged debt, offering greater financial agility and control.
While specific requirements may vary based on the loan type and lender, here is a general list of documents typically required for short-term business finance in India:-
• Business Proof:
o GST Registration Certificate.
o Business License/Trade License.
o Partnership Deed (for Partnership Firms).
o Memorandum of Association (MOA) & Articles of Association (AOA) (for Private/Public Limited Companies).
o Certificate of Incorporation (for Companies).
• Identity Proof of Proprietor/Partners/Directors:
o PAN Card.
o Aadhar Card.
o Passport.
o Voter ID.
• Address Proof of Proprietor/Partners/Directors:
o Utility Bills (Electricity, Water, Gas).
o Passport.
o Aadhar Card.
• Financial Documents:
o Bank Statements (last 06-12 months).
o Income Tax Returns (ITR) of the business and proprietor/partners/directors (last 02-03 years).
o Audited Financial Statements (Balance Sheet and Profit & Loss Accounts) for the last 02-03 years (CA certified).
• Other Documents:
o Proof of Business Continuation (e.g. ITR/Trade License/Establishment Certificate).
o Sole Proprietorship Declaration (if applicable).
o Board Resolution (for companies, authorizing the loan).
o Details of existing loans (if any).
Pro-Tip: Having these documents ready and organized will significantly expedite your application process.
Applying for short-term finance with Praman Advisors is designed to be a hassle-free and efficient experience:-
a. Initial Consultation: Our experts will understand your specific financial needs and recommend the most suitable short-term finance option.
b. Eligibility Check: We will assess your business's eligibility based on initial information and a preliminary review of your financial standing.
c. Document Submission: You will be guided through the process of submitting the required documents, ensuring all paperwork is accurate and complete. Our team will assist you in preparing a strong application.
d. Application Processing: Our AI-driven compliance solutions and expert team will diligently process your application, verifying documents and assessing your creditworthiness. We prioritize quick turnaround times.
e. Approval and Disbursement: Upon successful verification and approval, the loan amount will be disbursed directly to your business account. We aim for rapid disbursement to meet your urgent needs.
f. Repayment: You will adhere to the agreed-upon repayment schedule, ensuring timely instalments.
The fees and timelines for short-term finance can vary depending on the loan amount, tenure and your business's financial profile. However, here's a general idea:-
• Interest Rates: Short-term finance typically carries interest rates ranging from 13% to 35% per annum, depending on the lender, your credit score and the specific product. Praman Advisors strives to connect you with competitive rates from our network of lenders.
• Processing Fees: A processing fee, usually between 1% and 5% of the loan amount (plus applicable taxes), may be charged by lenders.
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• Other Charges:
o Pre-payment/Foreclosure Charges: Some lenders may levy charges, if you choose to repay the loan before the agreed tenure. These can be up to 4-5% of the outstanding principal.
o Bounce Charges: In case of bounced EMIs, a penalty fee (e.g. ₹1,500 per bounce) may be applied.
o Legal & Incidental Charges: At actuals, if applicable.
• Timelines:
o Application to Approval: With all documents in order, approval can often be obtained within 24-72 hours.
o Disbursement: Funds can be disbursed within 01-03 business days post-approval.
Praman Advisors is committed to transparency regarding all fees and charges, ensuring you have a clear understanding of the total cost of your finance.
Frequently Asked Questions
Common types include working capital loans, lines of credit, overdraft facilities, trade credit and merchant cash advances. Praman Advisors can help you identify the best fit for your business.
Many short-term finance options, particularly for smaller amounts, are unsecured, meaning no collateral is required. However, some larger short-term loans or specific types like bridge loans might require collateral.
A good credit score (typically 650+ CIBIL score) significantly improves your chances of approval and can lead to more favourable interest rates. Lenders view a strong credit history as an indicator of responsible repayment.
While traditional banks may be hesitant, some NBFCs and financial platforms offer short-term finance specifically tailored for startups, often requiring a sound business plan and consistent cash flow. Praman Advisors can guide startups to suitable options.
It is crucial to communicate with your lender or Praman Advisors immediately, if you foresee difficulties in repayment. While extensions are not guaranteed, some lenders may consider it based on your payment history and reasons, potentially with additional charges.
We leverage it’s expertise and network to:-
* Assess your unique financial needs.
* Identify the most suitable lenders and products.
* Help in document preparation and application.
* Negotiate favourable terms on your behalf.
* Provide continuous support throughout the process.