We have all heard the old adage, Cash is King, ever so often. But, for small and medium-sized businesses, it is a struggle to generate surplus cash, especially in the early years. With long payment cycles and increasingly frequent tax payouts, cash reserves for businesses are shrinking day by day.
Recently, we wrote a blog article on raising equity financing by diluting promoter shareholding. However, your business can also raise funds without you having to sell off your shares, by raising debt. The traditional way in which business owners mitigate working capital deficit is by using lines of credit through overdraft and cash-credit products from banks. However, this has its limitations as well and is often a function of the collateral provided.
Enter CGTMSE – the Government of India’s barely publicised special financial product that is designed to help businesses like yours flourish with working capital.
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was instituted by the government to provide collateral-free financial aid to businesses. Yes, you heard that right – you don’t need to mortgage your house (literally) to avail of a new line of credit!
Here’s How It Works –
- Companies can borrow up to INR 2 crore, based on their projected financials. Sanctioned amounts are usually 15 to 25% of annual turnover
- There is no collateral – the directors must simply stand as personal guarantors
- CGTMSE levies a fee of 1% to 2.6% of the sanctioned amount
- Your bank levies a fee of 9% to 11% based on the health of your business
- The overall borrowing rate ranges between 11.5% and 13%
- The funds are then available in the form of an overdraft facility with your bank within 3-6 weeks
Streamline all Back End Operations so that you can save Time & Money and focus on GROWING YOUR BUSINESS.
Streamline all Back End Operations so that you can save Time & Money and focus on GROWING YOUR BUSINESS.
Accounting & Tax: Let us crunch the numbers, so you can focus on growing your business.
Virtual CFO: Experience financial success with a Virtual CFO by your side.
Internal Audit: Gain peace of mind with our comprehensive internal audit services.
Company Secretary: Let our experienced Company Secretary guide you through corporate compliance effortlessly.
Now that you have access to a fresh line of credit, there’s a lot that you can do with capital to grow your business.
Running a business can be challenging, especially when it comes to securing working capital. Many small businesses struggle to secure financing because they don’t have the collateral required by traditional lenders. But did you know that the government offers collateral free working capital facilities for small businesses?
Collateral free finance, also known as capital collateral, is a type of financing that does not require a business to provide collateral in order to secure a loan. This means that small businesses without assets or property to use as collateral can still access the working capital they need to grow and thrive.
Debt free working capital is a term that refers to the money a business has available to cover its short-term expenses, such as inventory, payroll, and rent. A collateral free working capital loan can help a business access the funds they need to cover these expenses without having to put up collateral.
Many small businesses are not aware of the government’s collateral free working capital facilities and the benefits they can provide. That’s why Brego Business Accounting Services are committed to helping their clients access these resources and make the most of them.
At Brego Business Accounting Services, we understand the importance of working capital for small businesses. We help our clients navigate the government’s collateral free working capital facilities and secure the funding they need to grow and thrive.
Whether you are just starting out or looking to expand your business, a collateral free working capital loan can help you access the funds you need to achieve your goals. Don’t let a lack of collateral hold you back from reaching your full potential. Contact Brego Business Accounting Services today to learn more about how we can help you access the government’s collateral free working capital facilities and take your business to the next level.
Feel free to reach out to us on 9870523213 or pinkesh@savagepalmer.com if you would like to know more about raising debt.
