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Finance

5 Smart Solutions to get your Small Business out-of-debt

debt free business

The experience of being in debt can be scary as well as overwhelming. However, most entrepreneurs begin their start-up by arranging funds through debt funding, equity funding, loans, or through other less formal sources like friends & family.

If managed smartly, borrowing funds can help you accomplish your goals. On the other hand, mismanaged small business debt can not only affect your financial wellbeing but can also cause mental stress, especially to small business owners that are worse affected due to the Covid-19 pandemic.


In a bid to rescue the small business owners, the Indian government had offered relief to MSMEs in the form of subordinated debts, collateral-free loans, and equity infusion through its Fund of Funds (FoF) scheme in 2020. This scheme proposes to purchase up to 15% growth capital in high-credit MSMEs.

If you have a well-thought financial plan, you can solve the cumbersome process of taking your business out of debt, just like others. Here is how you can chart your way out of debt:

  1. Take Stock of your Debts

The first step that will take you closer to managing your debt is to organize all the details of exactly what you owe. Make a list of your debts with EMIs, interest rates, and tenures. This will help you recognize the costliest debts.

  1. Settle Urgent & Costliest Debts First!

After sorting out your debts, pick the costliest one! Costly debts, if not paid on time, will extract the highest interest. This can drain your finances. Hence, settle your costliest debts on a priority basis.

  1. Plan Monthly Budget

One of the most vital debt management techniques is to have a monthly budget, planned! Make a list of your income & expenses while deciding your monthly budget. This will give you a window to think about ways to reduce your daily expenditure. Having details of monthly cash-flow can help you save money that you can use to clear your debt.

  1. Consolidate Loans

Sometimes keeping a track of all the loans can be difficult. If you have too many loans, consolidating them into one can be a good idea. This will leave you with just one EMI. Business loans, personal loans, and credit cards provide you with this option. It will remove various debts and leave you with just one loan to track.

  1. Protect yourself Against Economic Shocks

The future is uncertain and it is wise to protect yourself from uncertainties that you might be exposed to. E.g. a loss of a job could lead to delayed EMIs. So, to avoid such situations, create an emergency fund to help you sustain during a bad phase. Ideally, this fund should be 3-6 times more than your current monthly income.

Repaying loans is a moral, legal, and also a financial obligation. With smart and effective debt management strategies, you too can get your business out of debt. Learn how to manage your debt with the top-industry leaders from our Problem Solving Courses. To know more, click here: https://www.badabusiness.com/psc?ref_code=ArticlesLeads 

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Finance

What is a Business Credit Score & Why is it Important? Here are Three Benefits of Having a Higher Credit Score

Business Credit Score| Representational image (Photo Credits: Pixabay)
Business Credit Score| Representational image (Photo Credits: Pixabay)

For firms to survive only on equity and owners’ fund is not possible. As a business grows, expands and diversify, more and more funds are required. Owing to the limited funds with the owner, businesses look for external sources and borrowed funds. Availing a loan is a tiresome and lengthy process; firms do not get the debt easily from the market. Lenders will be keen on allocating their money to the business, only when they are sure of uninterrupted growth and return. Here is when a firm’s credit score comes into the picture. Home Business Ideas: 4 Brilliant Work From Home Ideas That You Should Consider Taking Up.

In simple words, a business credit score is a number that indicates whether a company is a good candidate to receive a loan or become a business customer. This score is based on various parameters such as company’s credit obligations and repayment histories with lenders and suppliers; any legal filings such as tax liens, judgments, or bankruptcies; how long the company has operated; business type and size; and repayment performance relative to that of similar companies. Startups in India Bagged $9.3Bn Investments in 2020 Despite COVID-19 Challenges: Report.

Following the separate entity principle of accounting, the process of calculating the score only takes into consideration the financial position and performance of the business. However, in the case of a small business, the lender might check both the businesses’ and owners’ credit scores, since the personal and business finances of such firms are highly influenced by each other.

A good credit score helps businesses in more than one way. Here are three benefits of having a positive credit score –

 Quicker Approval of Loans

A good credit score is an evidence of the credit worthiness of an enterprise. If a firm has a positive credit score then it becomes easier for it to get loans, from small to large, without going through a time consuming and lengthy process. Higher credit score creates a credible identity for the business in the eyes of the lender and therefore gives your application a boost, giving quick approvals to loans.

Lower Interest Rate

Apart from the re-payment of the principal amount, a borrower needs to make regular interest payments as well. However, a good credit score allows the borrower to negotiate a lower interest rate. Businesses’ with higher credit scores are generally able to secure the lowest interest rates available at a given time, thereby reducing the repayment burden on the firm.

Easier Terms of Loans

One of the biggest benefits of having a good and high credit score is that it provides the businesses more bargaining power over terms of the loans, including the repayment period, repayment method, collateral requirements among others. Since a good credit score ensures that the business is capable of timely and full repayment, the lenders are comparatively lenient of the borrowers.

Hence a business should maintain a good and higher credit score to meet its funds requirement and avail quick loans at flexible terms of repayment. It highlights the creditworthiness of the business and attract private and institutional lenders.

 

 

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Finance

5 Tips for Young Entrepreneurs for Efficient Management of Funds

Tips for managing finance| Representational Image (Photo Credits: Pixabay)
Finance

Finance is the life line of any business. To start, sustain and succeed any organisation proper management of funds is important. For start-ups to establish themselves in the market and survive the stiff competitive environment, regular and steady stream of funds is a pre-requisite. The businesses need money to enter the market, undertake day to day operational activities, production, expand its activities, research and development activities. Several start-ups fail during the initial years of its establishment owing to the shortage of funds or irregularity of cash flows. 3 profit-making small businesses you can start under Rs 20,000.

Proper management of funds is important for long term survival of the business. Overfunding and underfunding are both harmful of the working on the enterprise. Lack of funds leads to interruption of business activities that leads to huge losses to the firm, while the excessive of funds leads to opportunity cost. So proper management of funds is crucial for success of the business. Here are few tips Young Entrepreneurs can follow to manage their finances –

Separate Your Personal and Professional Finances

The first and most important step of managing the funds is to keep the personal and professional money separate. Following the separate entity accounting principle, the entrepreneur should maintain separate accounts for the firm in its name and should not use funds received for the start-up for her personal expenditure. This will be helpful while calculating taxes and filing return as well.

Set-Up an Emergency Fund

The business environment is full of risks and uncertainties. There are continuous macro and micro environment threats that a start-up has to face. In order to cope up with the dynamic and ever changing ecosystem, an entrepreneur should make sure to establish an emergency fund or a reserve to meet such unexpected changes. Even if the business is earning huge profits, it is always advisable to keep aside some portion of money for contingencies.

Look for Diversified Sources of Funding

Though it is also easier to manage the equity funds, but the entrepreneur should not over look debt funding as well. Borrowed funds force the owner to make informed decision and wise investment choices. The capital structure of the enterprise should be a perfect mix of both owned and borrowed capital. Various capital structure theories have proved that a leveraged capital structure leads to higher valuation of the firm. 3 Futuristic Business Ideas for 2021 and Beyond!

Monitor the Expense

Another crucial aspect of managing the funds is to keep a tab on the expenditure. Though a firm has to undertake several expenditure in the initial stages of its life, an entrepreneur needs to make sure that no unnecessary expenditure is incurred. The focus should be on cost cutting and wastage reduction. Follow the principle of money saved is money earned.

Seek Professional Help

Not everyone understands the complexities of managing the finances. There are several financial analyst and advisors who will be able to provide a better guidance on the matters related to money and investment. They also help in ensuring regular and interrupted cash flows. An entrepreneur should not hesitate in seeking external professional help during the initial years of the business.

Finance is important to meet various capital requirements of the business at its different stages. Hence, an entrepreneur should follow ensure proper and efficient management of the funds to long term survival in the business environment.

 

 

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Finance

Mandatory 1% Cash Payment of GST Liability will Reduce Fake Invoicing & Tax Evasion

good and service tax
GST (Photo Credits: Wikimedia Commons)

To curb the menace of fake invoicing, the Central Board of Indirect Taxes and Customs has amended the GST rule. According to the new GST amendment, the taxpayers now will be required to pay 1% of GST liability in cash with effect from January 1, 2021.

This rule applies to registered taxpayers whose taxable income, other than exempt supply and export is more than Rs 50 lakh, monthly or the annual turnover is more than 6 crore. The rule, however, is not applicable in the cases where the registered person has deposited income tax more than Rs 1 Lakh in each of the last two years.

 

Also, the registered users who have received a fund of more than Rs 1 Lakh in the preceding FY on account of the export or inverted tax structure, are out of the purview of this rule. If the registered person belongs to a government body, PSU, from a local authority or any statutory body the rule will not apply to him/her. Small businesses including MSMEs and composition dealers are also exempted from the new rule.

 

Registered users who have paid output tax through cash over 1% of the total output tax liability, will be exempted from paying 1% of GST liability in cash. The mandatory requirement of 1% cash payment of GST liability will be applied to about 45,000 taxpayers, which only constitutes 0.37% of the total businesses registered in the Goods & Services Tax System.

 

The provision is meant to bring fraudsters or suspicious dealers who use a lot of fake credit to evade tax and make no cash payment under control. It would neither affect any genuine business dealer nor it will affect ‘ease of doing business’ in any manner. The new rule also restricts the use of Input Tax Credit for discharging GST liability to 99 percent.

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Finance

FY Budget 2021-22: FM Sitharaman Says the Upcoming Budget will be like Never Before!

budget 2021

The finance minister Nirmal Sitharaman on Wednesday concluded all the pre-budget consultations for the 2021-2022 Union Budget. 9 stakeholder groups and 170 invitees participated in the 15 meetings held between December 14 to December 23rd, 2020 online.

The Finance minister of India held a meeting with the sector experts related to infrastructure, energy, and climate change to sought suggestions regarding the upcoming budget. According to her recent statement, the upcoming budget will be completely different. The Union Budget for 2021-2022 will be presented under the shadow of the Covid-19 pandemic. The budget for the financial year 2021-2022 will be presented in the parliament on February 1, 2021.

 

The FY22 budget will focus mainly on the infrastructure, which is considered one of the most important parameters of growth. Many economists have predicted that the Indian economy will shrink by 7% to 9% in 2020-21. The finance ministry expects marginal growth in the economy from the December quarter. The Indian economy is also expected to bounce back in double digits on a low base.

 

Apart from the Finance Minister Nirmala Sitharaman, Union Minister of State for Finance and Corporate Affairs Anurag Singh Thakur, DIPAM Secretary Tuhin Kanta Pandey, Finance Secretary AB Pandey, Expenditure Secretary TV Somanathan, Chief Economic Advisor Krishnamurthy Subramanian, DEA Secretary Tarun Bajaj, and senior officers from the Ministry of Finance and other ministries also took part in the meeting.

 

Sitharaman had chaired all the pre-budget meetings that were held online with multiple stakeholders, industrialists, economists, and farmer bodies, etc. for their inputs and suggestions on how to revive the economy that has been severely affected by the coronavirus pandemic.

 

The stakeholder groups made multiple suggestions on various subjects that included Fiscal Policy (including taxation), Insurance, Bond Markets, Health & Education, Exports, Infrastructure Spending, Social Protection, Water Harvesting & Conservation, MGNREGA, Public Distribution System, Production-linked Investment Scheme, Ease of Doing Business, Branding of Made in India products, Public Sector Delivery Mechanisms, Innovation, Green Growth, and Non-Polluting sources of Energy and Vehicles, among others.

 

The stakeholders’ groups included representatives of the Health, Financial and Capital Markets, Education and Rural Development, Trade Unions and Labour Organisations, Water and Sanitation, Industry, and Trade, Services, Infrastructure Agriculture, Energy, and Climate Change sector, and Industrialists, Agro-Processing Industry, and Economists.

 

The Finance Ministry also said “the participants in the meeting lauded the efforts taken by the Indian government to flatten the COVID-19 curve a slow but strong recovery of the economy in the second quarter of 2020-21. They further stated that India is among very few countries whose economic activity has risen with declining pandemic induced fatalities”.

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Finance

5 Most Common ITR Filing Mistakes You Should Avoid!

income tax return filing

The year 2020 did not start on a good note, however, for taxpayers; there is a piece of great news. The deadline to file your Income Tax Return (ITR return) for FY 2019-20 has been extended to December 31, 2020, from the earlier deadline of November 30, 2020.

As the extended ITR return on the last date must have given the taxpayers some respite, the deadline to file your ITR return is fast approaching. As the taxpayers gear up to file for their ITR, we would like to point out five mistakes that can prove costly for you.

Here are 5 mistakes you must avoid while filing for your ITR return:

1. Not Filling Correct Bank Details

While filing an ITR return, a taxpayer is required to list out all the bank-related details. Make sure that you enter the correct name of your bank, account number, IFSC & MICR code while filing ITR returns online. Along with bank details, your details for communication should also be correct. The income tax department communicates through email and mobile phone. Hence, double-check all the required details.

2. Not Disclosing Every Bank Account Details

Not disclosing all the bank’s account details while filing an ITR return is the biggest mistake you can commit. All the details regarding your accounts in multiple banks need to be disclosed. Not disclosing that information is illegal. Thus, if you have multiple accounts in your name in different banks, you must disclose the information while filing ITR return online.

3. Not reporting incomes from investments

A taxpayer needs to report all the income from investments such as interest gained from fixed deposits (FDs), capital gains from mutual funds, or any other such assets. Most people generally forget to report interest received from their savings account in banks, recurring deposits, fixed deposits, etc.

4. Mismatch Income Form 26AS and TDS certificates

For employed taxpayers- Form 26AS is very essential and one should be careful while filing ITR. One little mistake can lead you to payment issues later. Keep all TDS certificates like Form 16, bank interest certificates Form 16A, TDS certificate from the sale of property-Form 16B. Also, check whether the correct TDS has been deducted against the PAN mentioned in the 26AS form.

5. Not Verifying ITR Return Online

Last but not least! It is important to verify your ITR return online to complete the process. You can verify your ITR return file via Net Banking, De-mat Account, Aadhar no., and bank account details. You can check your ITR return status online.
Keep the above-mentioned points in mind and ensure that you fill in all the necessary details carefully to avoid any future hassles.

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Finance

Gold Rate Today: Price of Yellow Metal at Rs 50,180 Per 10 Gram, Silver Down 2% to Rs 67,660 per kg

Gold
Gold (Photo Credits: Pixabay)

Mumbai, December 22:Gold and silver prices edged lower in Indian markets tracking a similar trend in international markets. On MCX, gold futures edged 0.5 percent lower to Rs 50,180 per 10 gram in the second decline in three days while silver fell 2 percent to Rs 67,660 per kg.

In the global markets as well, gold rates slipped. The Indian spot gold price on Tuesday was at Rs. 50,380 which grew by 0.02 percent; the rate was lower than the global gold spot growth rate of 0.21 percent.  The global spot price is $1881.

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In the global markets, gold slipped today as a stronger dollar offset Gold has climbed over 23 percent this year, mainly driven by a raft of pandemic stimulus measures that stoked fears of inflation. The precious metal is often used as a hedge against inflation.

US Congress approved $900 bn Covid-19 relief package on Tuesday. According to an AFP report, the overwhelming approval in Senate and House of Representatives cleared the way for $900 billion relief package for millions of Americans and businesses battered by the coronavirus. After receiving Donald Trump’s sign it will become a law.

The dollar to rupee conversion today improved to Rs 73 as compared to the previous close of Rs. 74.

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Finance

How the Revised Exchange Rates by CBIC will Impact Businesses in 2021?

Custome Exhange Rate

Whether it is importing machinery from Europe or exporting your goods to China, every business involves either receiving or sending a foreign currency from or to your business partner. Therefore, the custom exchange rate can have a direct impact on your business (small or large scale).

The Central Board of Indirect Taxes and Customs (CBIC)`s has issued a Press Release w.e.f from 18th December 2020 to rate of exchange. This exchange rate exposure can affect every business and the economy in both the respective ways -positively and negatively on a magnified level.

The RBI exchange rate is the value of the Indian currency to another currency. How businesses are affected by currencies can be divided into four categories i.e translational, credit, and liquidity risks. All four categories can then be subdivided into numerous subcategories to fit all kinds of businesses.

According to the recent Press Release issued by CBIC the field officers are suggested to refrain from raising unnecessary requests for the verification of preferential certificates of origin under the Customs Administration of Rulf Origin under Trade Agreements Rules or CAROTAR rules.

Read all the important information mentioned below:

Custom Exchange Rate

 

 

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Finance

With Improvement in Automobile Demand, Vehicle Finance Sector Witnesses Speedy Recovery in India: Report

Vehicle Finance sector shows speedy recovery| Representation Image (Photo Credits: Pixabay)
Vehicle Finance sector shows speedy recovery| Representation Image (Photo Credits: Pixabay)

According to a report by the equity research firm, Motilal Oswal Financial Services, the increase in demand of two-wheeler, tractors and passenger vehicles has led to an accelerated recovery in the vehicle finance (VF) sector over the past six months. The report has predicted that the credit costs across vehicle finance players is expected to be 1.7-4.4 per cent in FY21 and gradually revert to run-rate levels over FY22-23.”By August-September 2020, sales in most product categories picked up to prior year levels. PV sales for the industry improved significantly to nearly 100 per cent of prior year levels in 2Q from sub-30 per cent levels in 1QFY21,” the report said.

Similarly, 2-Wheeler and Tractor sales in 2020 surpassed prior year levels in August and September. “2W and PV segments have benefited from the preference towards personal mobility solutions. Tractors have benefited from a healthy monsoon in 2019, coupled with a strong Rabi crop,” it added. But, the M&HCV segment continued to be a laggard. “This segment was under pressure even prior to the Covid-19 pandemic. The channel checks suggest that used CVs are witnessing strong demand given the price hikes in new CVs,” the report said. “The checks also suggest that retail festive sales were in-line with prior trends in 2Ws and tractors and improved sequentially in the case of passenger vehicles.”

The report showed that disbursements by VFs in 2Q were not in line with underlying auto sales due to focus on collections and liquidity preservation. However, it is expected to pickup in 2HFY21. “VFs are well-positioned to witness an improvement in spreads as their yields are at fixed rates while most of their borrowings are at floating rates,” it said. Adding “With the moratorium being lifted in September 2020, most players have moved back to 85-95 per cent CE (collection efficiency).” In addition, the report said that with 120-230bp of COVID-19 provisioning over the past three quarters, the overall buffer has substantially improved. “RBI allowance of restructuring will also provide a breather for exposures facing temporary cash flow mismatches,” the report concluded.

 

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Finance

Gold And Jewellery Industry Hopes to See Demand Recovery in H2FY21: ICRA Report

Gold
Gold (Photo Credits: Pixabay)

Mumbai, November 27: The gold and the jewellery industry expects a demand recovery in H2FY21. According to a report published by ICRA, the industry believes that demand will improve on the back of occasions like festivals and weddings. The gold jewellery retail industry had witnessed a sharp 64 per cent contraction in H1FY21.

A positive trend highlighted in the survey was that the opening of the stores post the coronavirus pandemic induced lockdown has seen a steady improvement in footfall although these were still much lower than last year.

The report further mentioned, “Further, factors like rising preference towards gold as an asset class, favourable rural output amidst good monsoons, expectations regarding the further rise in gold prices etc are likely to support demand in the next few months.”

The industry is grappling with a decade-low level of demand during FY2020, battling multiple headwinds like weakened consumer sentiments amid a sharp rise in gold prices, subdued rural output, and fall in consumer surplus.