The professional services industry covers a wide range of occupations as it can consist of any organization or profession that offers customized, knowledge-based services to its clients. Their characteristics include people that have specialized training in the arts or sciences and can be organized into four different types. These include law and accounting firms, hospitals, management consultants, and biotech, all of which are classified by a high knowledge intensity.
It doesn’t matter how great your idea is for a business, and you need finances to make it a reality. The business which isn’t growing with time isn’t profitable. So you always need to think about growing your business and making it more valuable.
With a business loan, you can opt for paying salaries to your employees, along with utility and debt servicing. On the other hand, you can use the loan amount to change the decor of your restaurant and make it look completely different. Many owners are doing the same thing by making their restaurant more appealing to millennial.
- Pan card
Proof of residential address (any one)
- Rent Agreement
- Driving License
- Voter’s ID
- Ration Card
- Last 6 months of bank statement of current account
- GST Registration Certificate
- Shop Establishment Certificate
- 2 years Audited financials
- Last 2yrs ITR
- GST Returns of 6 months
Types of Business Loans for Service Sector
The following are various kinds of loans available to businesses in the service industry:
1. Working Capital Loans
These loans are available to businesses to run their day-to-day operations like paying of salaries, payment for utilities, debt servicing, website maintenance, etc. Working Capital Loans are generally short term in nature with tenures between 6-12 months. These loans are granted at a fixed rate of interest.
Working Capital Loans may take different forms like Cash Credit, Overdrafts, Commercial Papers, Bank Guarantee, Letter of Credit, etc. Certain working capital loans are granted against the security of collateral if the company is new to banking with the lender or does not have a good credit score.
Companies could borrow working capital loans from traditional banks, Non-Banking Financial Companies or from Fintech Lenders.
2. Invoice Discounting for Service Industry
The service industry forms a critical component of the Indian economy, accounting for nearly 60% of the country’s GDP. Today, the service industry has emerged as one of the largest and fastest-growing sectors, consequently contributing to global output, attracting significant foreign investment flows, and generating employment. However, several factors like increased competition, tighter margins, longer and delayed payment cycle, payment defaults add on to the many challenges that businesses need to endure.
Nonetheless, on a daily basis, the service industry produces a considerable number of invoices, resulting in the need for quick access to working capital. An easy and efficient way to tackle pending invoices and concurrently generate working capital is through Invoice discounting. Invoice discounting for service industry can help fund companies by freeing up cash sitting in unpaid invoices. By getting access to the working capital, businesses can pay the labour costs, procure raw materials, and settle outstanding bills, salaries, distributor charges on a timely basis. Additionally, the dependency on unpredictable and fluctuating factors makes it all the more necessary for businesses to have a seamless cash flow system.
3. Revenue Based Finance
Revenue-based financing or royalty-based financing is a potential method of raising capital from a firm’s investors to meet business-oriented requirements. In exchange for the investment amount, individuals are entitled to receive a portion of the firm’s projected earnings, based on previous sales figures.
Investors continue to receive such pay-outs until they obtain a predetermined amount. Generally, the said predetermined amount is a multiple of their invested sum and tends to range between at least 3 to 5 times the principal investments.
4. Term Loans
Although companies in the service industry do not need extensive equipment as in case of manufacturing companies, they may very well need term loans. All those loans which have tenure greater than 1 year are called as Term Loans. These could extend up to 5-7 years or even longer depending upon the need for the loan and loan deciding policies of the lender.
As these loans are spread over a long term, the companies can use it to build assets like office space, warehouses, etc. These loans are also bigger-ticket loans than the working capital loans. Terms loans could also be used for business expansions or similar needs of the business. As these loans are spread over a longer period, companies have more flexibility in planning their finances and for meeting debt repayments.
Long term capital loans can be generally availed only with traditional channels of lending like banks or NBFCs.
5. Capital Loans
Capital Loans are meant for investment purposes of a business. These loans are also longer in term like the Term Loans. Capital Loans could come in the form of Debentures or preferred stock. These loans are against the charge of a particular asset of the company.
Unlike loans which are raised from a bank or an NBFC, capital loans like debentures or preference stock is the money from general public through an offer. These debenture holders are paid a fixed sum of interest similar to a bank loan. However, raising this form of capital requires a lot of background work. The company will have to be rated by a rating agency like CRISIL or ICRA, road shows are conducted and the issue is opened for subscription to the public.
The process of issue of debentures is something similar to shares and they are also listed on the stock exchanges. It might be difficult to companies of smaller sizes to issue debentures to the public. As said earlier, these loans are raised from the public, both retail and institutional investors could subscribe to the debentures issued.
6. Personal Loans
When the business establishment is small, there is hardly any distinction between the promoter and the business for many reasons, like the length of the time business has existed or unavailability of credit history. This is also true of Proprietorship and Partnership forms of businesses.
In those times, personal loans can also be availed for use in business. But a word of caution, personal loans so availed are against the personal surety of the promoter, so if the individual is unable to pay back the loan, the personal credit score gets affected.
Where to get a Business Loan?
FundsTiger provides different types of loans for different purposes. FundsTiger is a popular online loan platform. Our consumers come to us for their money requirements, whether they are short-term or long-term, small-ticket or large-ticket, personal, family, or business. FundsTiger team brings a wealth of international financial knowledge to the table and tailors it to your specific needs. Money advice, credit advice, wealth planning, and, of course, credit are all available to our clients.
Faster Funding – We are over 80% faster than most traditional banks and lenders
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Customer needs in Forefront – Your needs are our priority. We promise to deliver you with services that are best on our capabilities. By handpicking the personal loan offers based on customer profile, we try to give you the most personalised experience.
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Real-time Customer Support – Our customer support team is fast and efficient to clear all your doubts regarding personal loan eligibility, procedures, offers, documentation and repayment options. We even contact with the respective lender on behalf of you.
Cutomised Tailor Options – Depending on your demands, we may provide quick financing of varying quantities at affordable interest rates.