Unsecured Debt Funding
Unsecured Business Loan
An unsecured business loan is a type of financing that doesn’t require collateral or a personal guarantee to be secured. This makes it an attractive option for small business owners who may not have valuable assets to offer as collateral. However, lenders generally charge higher interest rates on unsecured loans since there is a higher risk involved. It’s important to weigh the pros and cons, compare interest rates and terms from different lenders, and carefully consider how the loan will be used before applying for an unsecured business loan.
Unsecured Working Capital
Unsecured working capital refers to the funds a company borrows or uses from its own resources to finance its short-term business activities, such as inventory and accounts receivable. Unlike secured financing, where the company pledges collateral as a guarantee, unsecured working capital financing is based solely on the company’s creditworthiness and ability to meet its financial obligations. This type of financing is more common for small and medium-sized businesses and can be obtained from a variety of sources, including banks, credit unions, and online lenders.
Loan Under CGTMSE
Under the CGTMSE scheme, a bank loan of up to Rs.1 crore provided to a startup or an existing business in the form of term loan or working capital or both can be covered. Businesses in the manufacturing sector and service sector are eligible.
Trade Financing
Trade financing is a type of financing that is used by businesses to finance their trade activities. It is typically used to finance the purchase of goods or services from a supplier or the sale of goods or services to a customer. Trade financing can take many different forms, including invoice financing, purchase order financing, and supply chain financing. It is designed to help businesses manage their cash flow and improve their liquidity, allowing them to trade more effectively and grow their business.
Debt Syndication
Debt syndication is a process where multiple investors jointly fund a debt, typically by purchasing shares in a loan issued by a bank or an investment fund. In this way, the lenders share the credit, investment, and liquidity risks associated with the debt. It allows borrowers to access larger amounts of funds than they could obtain from a single lending source, while also providing investors with an opportunity to diversify their portfolios. Debt syndication is commonly used by corporate entities, real estate companies, and governments.
Bill Discounting
Bill discounting is a form of financing in which a company sells an invoice or “bill” to a bank or financing company for a discount. The discount at which the company sells its invoice allows the bank or financing company to profit from the deal and mitigates the risk of potential non-payment.
This can be done in various ways such as a percentage or dollar amount off the total, or by applying a discount code or coupon. Bill discounting can be advantageous for both the payer and the payee, as it can help to encourage timely payment and improve cash flow. Additionally, discounting can also be used as a marketing tool to attract new customers and retain existing ones.
LC Discounting
A Letter of Credit (L/C) is a financial instrument issued by a bank or other financial institution, guaranteeing payment for goods or services to the beneficiary if certain conditions are met. Discounting refers to the process by which an L/C is sold before its expiration date, allowing the seller to obtain an early payment. Discounting L/Cs can be done in various ways, including direct discounting by the issuing bank or indirect discounting through factors or brokers. Discounting rates can vary based on factors such as the term of the L/C and the creditworthiness of the issuing bank.
Bank Guarantee Facility
A bank guarantee facility is a service offered by banks that allows businesses to secure financing by providing a guarantee that the bank will pay off the debt if the business is unable to do so. This type of guarantee is often used when a business is unable to provide adequate collateral or when the lender is hesitant to lend money without some level of protection. Bank guarantee facilities typically require the posting of a deposit or collateral with the bank as security for the guarantee.