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M Powering SI’s; Financing Options available in India

Financing options are the life line for the business. There are multiple financing options available for Channel partners to grow their business.

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Ankit Parashar
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Financing options are the life line for the business.  There are multiple financing options available for Channel partners to grow their business and to fight with the cash flow challenges.

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The business financing landscape is continually changing, with more options available to business owners than ever before. About half to two-thirds of these businesses seek financing from a number of places, from owner investments to non-bank sources. As small businesses continue to face challenges when it comes to gaining access to capital and taking advantage of opportunities to grow, it’s important that they're seeking the right type of financing for their particular needs. There's been a lot of focus on “alternative” lending recently, but how do business owners know when this is the right option to pursue?

One of the most obvious and common answers is that businesses seek financing when they're faced with an unexpected opportunity or challenge that requires quick capital.

Talking about the IT Eco system, companies in the IT sector have fewer options for accessing capital. Moreover, they often face resistance from traditional lenders. This sector has been struggling to keep up with market transitions.

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A SME require timely and adequate capital infusion through term loans and working capital loans, particularly during the early and growth stages. Historically the MSMEs have relied on following sources for financing their needs:

  • Credit Limit from the Distributors
  • Loan from banks
  • Personal savings
  • Loans from relatives
  • Loans from unregulated market
  • Funding from Vendors/ Govt.

Incred Finance

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asim-hussain

Partners have many options where they can raise and avail the maximum funds.  Incred Finance (who has acquired the business of X10 Financial Services Limited) offers flexible credit facilities to IT resellers for easing their cash flow management and helping partners grow their business.

  1. Inventory Finance Product – This product helps partners to pay their vendors in time for inventory purchases. Incred sets up a line of credit specifically for payments to approved suppliers on behalf of the partner. Partners can avail (subject to requirement and credit worthiness) from 10 lacs to up to 500 lacs collateral free credit limit. We offer additional 60 to 90 days credit period for the partner to repay the loan which will then ‘free up’ the limit for next cycle of payments.
  2. Project Linked Finance – This product is aimed at System Integrators (VARs) who execute quality projects and are often constrained to pitch for larger projects due to inadequate finance availability. Incred offers project based credit limit and extended credit periods to help partners execute projects and manage repayments to vendors.
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Asim Hussain said, “Partners have various financing options and we offer the flexible credit facilities to IT partners. We ease partner’s cash flow management and we help partners to grow their business”.

Rashi Peripherals

rajesh-goenka
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Financing option/ raising funds from the distributors are also a reliable source for partners.  Rashi Peripherals offers various modes like CDC, Credit subject to credit limit, LC, DG and channel financing. As long as the partner has a good track record there are various modes of financing.

This helps to within limited capital investment, it help partner to scale up its business. These are also very important when sudden large deals are done.

The financing options that are available are Cash Credit and Overdraft against your stock and or customer outstanding that a bank or third party financing agency offers to the channel partner in the IT business. There are other options like Letter Of Credit and or Bill Discounting which are normally used by some when the transactions involved are of high value or imports and these are again offered by banks and third party entities.

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Capital Float

sashank

Capital Float is a digital financing platform that provides quick and easy capital to help SMEs fund rapid growth and achieve their next milestone. The company also manages India’s largest online lending marketplace, with leading banks and financial institutions participating as lenders.

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The various financing options Capital Float provides are:

  • Pay Later: A collateral—Free credit facility that allows the borrower to make multiple drawdowns within a credit limit. The borrower can make bullet repayments and reset the credit balance, making this a rolling loan facility. Interest is charged on the drawdown amounts and not on the entire credit limit. The unique product was created by Capital Float. We’ve partnered with several prominent companies in the travel segment for this product, such as VIA, Yatra and Goibibo and computer peripheral sellers such as Savex and Compuage. This unique product has enabled Capital Foat to service Channel financing requirements across varied ecosystems like Travel, IT Peripherals, Mobile phone distribution.
  • Kirana Loans – Capital Float offers micro loans to Kirana store owners in India. These loans are disbursed in less than 90 seconds. These loans are completely paperless in nature and are digitally processed and disbursed to the borrower’s bank account. There is little to no human intervention, as even the underwriting is done by algorithms. We have partnered with the likes of PayTM, Payworld, Oxigen, ItzCash etc.to serve customers in the kirana segment. Watch this short video to know more about this product.

  • Online Seller Finance: The e-seller space is highly competitive and we understand the need for e-commerce sellers to be able to quickly replenish inventory, effectively manage logistics and tactfully handle customer expectations. The partnerships with India's biggest e-commerce platforms helps online sellers access fast and flexible working capital loans to operate optimally. Borrowers can opt for fortnightly repayments, preventing the burden of paying larger sums at the end of every month. We’ve partnered with Amazon, Flipkart, Snapdeal, PayTM, Shopclues, eBay, Alibaba, etc.
  • Taxi Finance – Company offer among the lowest down-payment in the industry, helping cab drivers to own and drive their own taxi on taxi-aggregator platforms like Uber and Ola. These companies deduct the weekly installment from their driver’s earnings and transfer the amount to Capital Float, before remitting the earnings to the driver’s account. The weekly installments reduce the burden of heavy EMIs on the driver.
  • Merchant Cash Advance: Businesses are actively using card payment machines to offer convenience to their customers. Apart from being integral to in-store sales, these devices can also help merchants acquire working capital to execute and expand business operations. Merchants can receive finance up to 200% of their monthly sales from card swipes.
  • Invoice Finance: Invoices can be liquidated into funds that can be used to fuel business operations. Borrowers can manage their payment commitments better with our invoice financing option. Companies product converts invoices into money that can be immediately deployed to get their business going. Borrowers can opt for the one-time bullet repayment mode to suit their cash flows.
  • Term Finance: This typical, unsecured business loan and is relevant to B2B service providers, manufacturers and distributors. The loan tenure ranges between 6 months to 3 years, making it a relevant product for different types of businesses.

Good Credit History to get Easy/ Hassle free finance

Though there are many financing options available for partners but the there are parameters also what partners to follow to get the hassle free finance.

According to Capital Float, Company  works with National and regional distributors to finance their respective networks. The channel financing option extends to retailers as well.

“We have partnered with large IT distributors such as Savex and Compuage. We provide channel financing for their channel partners, based on their sales performance, track record with the partner, etc. Loan sizes range from as low as 2 lakhs and go upto 50 lakhs, based on the sales performance of the channel partner with the distributor” said, Sashank Rishyasringa, Co-Founder, Capital Float.

Incred Finance essentially looks at 4 key parameters:

  • Background and experience of promoters in the IT distribution business
  • Cash flow situation to ascertain repayment capacity based on financial statements
  • Past history of loan repayments if any (Credit Bureau reports like CIBIL)
  • Past track record of repayment to vendors/National distributors.

Rajesh Goenka VP Sales and Marketing, Rashi Peripherals said, “Capital investment, payment track record and balance sheet are the major drivers for credit availability. This helps to within limited capital investment, it help partner to scale up its business. These are also very important when sudden large deals are done.”

ravi-nandi

Partners have various options to get the finance from the various sources. Ravi Nandi, Director, Business Automation Indore added into the same and said, “We have many  Financing options like we prefer Cash credit limit /LC / BG limit from Bank based on equitable mortgage of properties. We get Credit limit available from the distributors and also vendor sponsored overdraft facility available from banks. American express and IT finance companies like X10 are also some good options available.”

crystal-solutions_vasant-bhanushali

Adding into the same, Vasant Bhanushali Director, Crystal Solutions said, “Rising funds is one of the main aspect while doing any business. We use CC limit from banks to run our business. Cash credits are more commonly offered for businesses than individuals. They require that a security be offered up as collateral on the account in exchange for cash. We also use CC limit to run our business”.

b4b-it-solutions-suresh-prasad-singh-3-618x410

Suresh Prasad Singh, CEO & Founder, B4B IT Solutions  added, “B4B Solutions have a combination of Vendors and Banks support to finance its Business need, We work with vendors closely and get the extra credit period, our long relations with bank help us in getting the credit and financing for the short term and long term needs.”

“B4B Solutions follow an early strategy to plan its finance requirement as early as possible, so that any such financial situation  does not slow down the business, he added.

suresh-ramani

Suresh Ramani, Tech Gyan shared his finacing option and added,We have our own working capital which is enough to take care of our business since our business is almost fully Cloud based where we do recurring billing. So we do not have huge requirements which may be the case for many SIs.”

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“Financial options apart from bank are credit limit with national distributors, importers, private financiers and ofcourse your goodwill. The best way to get fund for the business is CC limit from the Banks. If is really very effective and reliable for any businessman.  Financial backup plays crucial role in business as it is considered as the back bone of any venture” added, Nikesh Sakaria, Director CDP India.

Loan from Banks

Talking about the same, Channel partners who have different kind of financing options as per their easy reach and compatibility.  Raise Money through Banks Loans is one of the main sources of raising fund for the business. Public sector banks have been pioneers in providing financial assistance to several SME’s which can approach the banks for loans under various schemes. The bank provides two kinds of financing for businesses. One is working capital loan, and other is funding. Working Capital loan is the loan required to run one complete cycle of revenue generating operations, and the limit is usually decided by hypothecating stocks and debtors. Funding from bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.

pramod-dalmia

Pramod Dalmia, Spur Electronics, Mumbai said, “As per my perspective, banks are the best financing option for us. We get easy and quick finance according to our limits and we see the Banks offers decent amount of Rate of interest which is more likely for every SI’s and partners in India.”

“Other option could be loan from Pvt agencies or friends which could be secured or unsecured. If one gets o Veer draft account of cash credit account with good Limit, then it's the best option. Here you are charged interest only on the money used,” he added.

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Yogesh Godbole, Director, Ace Brain Systems shared and said, “Bank is primary lender, however there is channel finance option available with NDs. Collaterals is a biggest pain in getting finance, Some banks need 100% security against advances / finances given. If I have sufficient money why should anyone keep as mortgage and take finance by paying interest? But some innovative financing options like Factoring/Bill discounting/Advance against Bank Guarantee reduces interest burden and creates enough liquidity for running business.”

In the end, a company seeking funding options must have in place a team that is convinced that there is a need to consider seeking funding options, either for sustenance or growth. Additionally a good rating reflects an organization’s credit worthiness and that would help determine its probability of meeting financial obligations, be it debt servicing or equity allocation. All this would go a long way in helping solution providers get their required funding without much worry or hassle. The rest like they say is for them to see. Alternative sources of finance can, therefore, step in and assist IT players in their growth and development. They should improve their governance and risk management practices, maintain proper books of accounts, submit correct information to banks and all authorities, and make their operations more efficient and productive to get easier access to finance from banks and other investors. This way the IT sector would become more competitive and efficient and contribution further to the economic development of our country.

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