Why Start-ups Should take Business Loans

India ranks third globally in the number of start-ups, which crossed 4,200, according to a NASSCOM report in October 2015. Start-ups are thriving in the country, owing to the competitive environment, better opportunities, better infrastructure modules and ease of finance. Finance is one of the most essential aspects for any corporate entity: whether it is a start-up or an established firm. The smooth flow of money is required to setup a business, for its day-day functioning and growth and expansion.

Advantages of Debt Financing

Start-ups may have a tough time funding their enterprise, especially in their nascent stage. Business loans are one of the most suitable options at this time, as well as in the company’s later stages. Here are few points that prove why start-ups should opt for corporate loans.

Business loans

1.     Reduces Personal Liability – Funding your business through your personal savings might have crossed your mind. Although it frees you of the burden of repayment, it comes with its own set of risks. Being a start-up, you can’t expect returns on investment during the initial years and there is a risk of loss as well. Moreover, it is wise to store your savings as an emergency fund. Also, you might be able to raise a much larger amount of money by seeking financing.

2.      Ownership Remains Intact – Unlike angel investors and venture capitalists who own equity against their investment in the company, ownership rights remain intact when you take a business loan.

3.      Tax Benefits – The interest payments are tax deductible. It is perhaps one of the biggest advantages that such form of financing offers.

4.      Profits Remain Intact– Much like banks have no say in operational decisions, they also do not have a share in your profits. You can use the profits to repay the credit amount or you can reinvest it.

5.      Long Repayment Tenure – Flexible repayment options makes it one of the most lucrative financing options. Such loans may have a tenure of as long as 10 years. The tenure differs according to the bank’s policy.

6.      Builds a Strong Credit History – SMEs can have large sums of money to fund various business activities. Timely and early repayments help to build a strong credit reputation, which can help you to secure future loans.

Banks and other financial institutions are less than willing to offer unsecured loans to start-ups, owing to the lack of experience and short timeline of business activity. Firms can take loans against securities in such cases. Securities may include inventory accounts, receivables, equipments, insurance policies or property. Banks in India also offer property loans to fund business activities, both against residential and commercial properties.

Does It Make Sense for Me to Invest in Real Estate?

According to the Ministry of Commerce, the Indian Real Estate market size is expected to reach $180 billion by 2020 from $93.8 billion in 2014. The government approved 100 smart city projects in August this year. Demand continues to be high in the face of supply for real estate across the country. In fact, along with equities, investments in the real estate sector have provided the highest returns reaching 20% over the last two decades.

Real estate will continue to appreciate as long as India’s human capital continues to expand and the GDP growth rate stays positive.

real estate investment

Is the Real Estate Market a Cause for Concern?

If you think that you should not now invest in residential property because markets have yet to correct themselves or that builders have been sitting on a large pile of unsold inventory and that the weak global economy restricts FDI flows into employment generating sectors then you could be in for an indefinitely long wait.

The soon to be implemented Real Estate Regulation and Development Bill 2015 is further expected to lift consumer and market sentiment.

It is true that the real estate sector has been hampered by fraud and red tape but proper care and precaution while making the purchase can ensure that you do not miss out on the opportunity to partake of the unparalleled returns.

real estate fund in India

Real Estate Investment Tips

·         The past record of a developer and the number of completed projects on time is a good indicator of whether a developer can be trusted or not.

·         That the location of the property in question drives prices is one of the most sound real estate investment tips you’re likely to hear.

·         As land acquisition continues to be controversial, real estate funds in India are a great alternative to owning a property. A Private Equity Fund works just like a Mutual Fund by letting experts handle the veracity and credentials of an under construction project. You also get the benefit of certain returns without taking the risk involved in a single project.

·         The capital involved in a real estate fund in India is also less than that in buying a property.

·         Investing in real estate should be looked at from a long term perspective. Hold on to your property for say 10 years and you will notice the power of compounding growth rates that give spectacular returns.

Property rates in favored locations in New Delhi and Mumbai are one of the highest in the world. Remember that real estate funds in India provide returns higher than gold or silver and are less volatile than equity. Economic growth in India is expected to continue and consumerism set to rise. It is best to buy before the market reaches its peak as by then you cannot hope to earn any higher returns on your investment.

Understanding 'Family Health Plans'

In today’s times, with uncertainty and illness dogging our every step, it is important to provide the best we can for our families. This entails securing our loved ones’ future in the only way we can – with the purchase of health insurance.

family health plan

But it is equally important to include the entire family – parents, spouse, children, and dependent siblings – in the ambit of health insurance. There is no way to predict what kind of health disaster will befall you or a member of the family. It is always prudent to be prepared to face the worst than to be stuck in a tragedy without financial help.

Many people take individual health plans; while this is a good practice, it is cheaper to include the family in one comprehensive family health plan than separate policies for all. The following questions will answer your doubts about the wisdom of taking family health insurance policies:

1. What does a family floater health insurance plan do?

It is designed to protect each member of the family from the costs of hospitalisation and treatment. It provides coverage against expensive treatment before and after surgery, hospitalisation charges and even accords daily cash allowance for those making hospital rounds every day. In short, it is a way of providing access to quality healthcare to yourself and your loved ones.

2. What kind of benefits does family health plan offer?

Most family health insurance policies cover hospitalisation, treatment costs, medical bills, doctor’s visit costs, post-surgery care, temporary or permanent loss of income due to illness/death, children’s education in case the earning member of the family passes away and some amount of money for the family’s upkeep after loss of income. Some plans also include cashless hospitalisation, which helps the policy holder get admitted to hospital and avail of treatment without paying a single rupee. Family health insurance policies are designed to take care of the family’s expenses both during the treatment period and post the death of the loved one.

3. Why can’t I simply save money for future health eventualities, instead of taking health insurance?

Because years of savings can be wiped out in just one hospital visit. After that point, there is no way to recoup your finances in a hurry. Instead of this, spending a few thousand rupees every year towards family health plan premiums can secure your loved ones in the most dependable way. You only need to pay the premiums every year or upgrade the sum assured whenever needed – at the time of a crisis, the insurer will take care of all the expenses. Thus, your savings are left untouched and can be used to create wealth for the family. 

5 Tips on How to Get Good Returns from Your Property Investments

“Buy land. They're not making it anymore.” - Mark Twain

While it is largely true that real estate is a high yielding investment, in order to maximize returns, you need to know how to invest in property. Returns are largely volatile in the short term and one needs to make astute decisions to make the most of them. While current housing prices in India are in a slump due to higher supply, most property markets are expected to see turnaround and start pricing in a volume recovery in second half of 2016, said the Bank of America Merrill Lynch report. This is according to the article published in Economic Times on October 9, 2015.  This good news for those who are looking to invest in property in the near future, as long as they adhere to some basic property investment tips.

property investment

Essential Property Investment Tips

Upcoming Area: Real Estate is a high yielding, low risk investment, if you know how to invest in property. The best thing to do is to invest in an area that is growing instead of an already established area. The chances of value of properties in such areas appreciating are higher, as most popular areas reach a price plateau after a few years.

Value-Adding Amenities: If the property has recreational amenities nearby, its value is bound to increase. For instance, if it overlooks a park, or if it has a mall or marketplace nearby, it is a good investment to make. It is also a smart idea to go in for a property that is at its nascent stages of development with concrete plans of such amenities in the near future, as the chances of making a larger profit on it is higher.

Easy Access: One of the factors that push the price of real estate is its accessibility and proximity to public transport. If there is a metro station at walking distance, you can be sure it will be selling at a prime rate. If you invest in a property that is on the future route of the metro line, its value will increment considerably.

Schools and Hospitals: This is an essential factor that effects the marketability of your property. Most people who are looking to invest in real estate are those who are looking to settle down. Having hospitals and schools at close proximity to their home will on top priority. If your investment offers these facilities it will definitely not lack prospective buyers.

Business and Job Opportunities: Long commutes have become the norm in metropolitan cities. Therefore, properties that are closer to business hubs and corporate companies are sure to be in high demand. This is one of the most useful property investment tips to be kept in mind, as it has maximum bearing on value appreciation. 

Looking for a Loan This Diwali ?

According to government estimates, only 4 percent of 57.7 million small business units in India have access to institutional finance, leaving many to rely on informal lenders, says an article published in Reuters in March 2015. Businesses need smooth and continuous flow of capital in order to function, expand and grow. Obtaining business loans from a bank is one of the most preferred options when it comes to fulfilling capital needs.

business loans

Types of Corporate Finance Solutions

Banks and non-banking financial companies have designed products catering to the specific capital needs of businesses. Listed below are some of them.

1.      Capital Market – This service lets business houses monetise their equity investments, such as shares, mutual funds, insurance policies and debt instruments, in order to raise long-term capital. Such a funding option lets you raise loans against shares, securities, mutual funds, insurance policies, and corporate and government bonds. You can also leverage/trade in equity shares at a per-defined margin, also known as margin trade funding and IPO financing. Customised and specialized solutions for every company are also offered.

2.      Corporate Finance – Corporate finance options are available to SMEs, and mid and large corporate houses. The various types of credit facilities available under this category aim to fulfil the working demand and growth capital needs of the businesses. Corporate finance includes working capital demand, term loans, SME loans, transaction facilities with bankers, line of credit, structured finance, treasury risk solutions as well as invoice discounting. You can also acquire credit under treasury risk solutions that enables you to protect your business against currency volatility.

3.      Commercial Real Estate and Mortgages – Property is leveraged to borrow funds for immediate and long term financing needs. This credit facility lets business houses borrow money through customized products, such as loans against property/property loans, lease rental discounting, construction finance as well as commercial property purchase loan.

4.      Project and Structured Finance – This product specifically provides financing for projects in the infrastructure, core, manufacturing, hospitality, education and healthcare sectors. Credit is offered for the project as well as for interim financial needs, for additional funding requirements beyond senior debt and equity as well as corporate loans that help companies tide over unforeseen/unplanned fund requirements by providing credit for general corporate purposes.

5.      Debt Syndication – This enables companies to raise short term and long term funds through the banking sector or the broader debt market. It basically refers to loan advisory services, where the lending company coordinates all activities related to syndicating a bank loan to meet various requirements of the borrower, which might include capacity expansions, working capital requirements, refinancing of existing obligations, merger and acquisition, and leveraged buyouts. 

Know Your Budget When Choosing Health Insurance

The latest official data shows the number of people covered by health insurance in India could be far fewer than estimated. Only 21.62 crore people, or 17 percent of the total population, were covered by health insurance at the end of March 2014, according to an article published in The Hindu in December 2014. Most often, people lay emphasis on life insurance in India and sometimes even think that it would cover for healthcare costs as well.

health insurance in India

Factors that Determine the Premium

Health insurance is one product that will help you save from financial crises in case of grave medical emergencies. But if not thought out carefully, it could well become a financial burden over time. You must budget your health insurance in order to save yourself from paying higher premiums. Insurance companies/banks sit down and after thorough calculations, determine the premium for a policy. Most banks have a base premium rate but the actual premium one pays might differ for same policy because of a host of factors that differ from individual to individual. Here are few factors that are usually considered to determine the amount of premium you pay:

1.      Age – Age of the insured is an important factor for determining the premium. Senior citizens may have to pay very high premiums, as compared to younger individuals. Premiums may also be higher for individuals above 45, since they are more likely to fall ill as they age. Also, if you buy a policy at 30, its premium increases as you move from one age bracket to another. Likewise, you may have to pay higher premiums for the same policy after you cross 40.

2.      Pre-existing Illnesses – People with pre-existing illnesses are usually charged a higher premium. Such illnesses might also not be covered by the policy for the first few years.

3.      Sum Assured – The higher the sum assured, the higher the premium. Determine the optimum amount of cover you need, current financial status and future financial goals before deciding on the sum assured.

4.      Type of Policy – Family floater policies tend to have higher premiums than individual policies, since they offer cover for many people under the same plan.

5.      Personal health – Personal health of the insured is an important factor that determines the premium. This may include lifestyle habits, such as smoking. Premiums are generally higher for smokers.

You can also seek advice from a financial planner in order to budget your health insurance plan and get the most suitable deal possible. Also consider buying health insurance online, since online plans tend to be cheaper than their offline counterparts.

Demystifying Investment Management, Portfolio Management

Investors all over the world have long known that all their eggs should never be put in one basket. To further underline the case for diversification, an article in Forbes, published in February 2015, showed how big and small investors alike who failed to appropriately diversify, found themselves caught up in the “financial hurricane” of 2008-2009. In fact Fidelity Investments explains that the main objective of diversification is not to ensure better performance for your investments but to improve returns for your specific level of risk tolerance. This is where investment management services and professional services for portfolio management and share trading in India come to the rescue. However, many of us are filled with doubts and uncertainties when we think of enlisting professional services. To help you make an informed decision, here are the answers to the most commonly asked questions in this arena.

portfolio management

Top 3 Investment Management FAQs Answered

1.    Why do I need an investment manager?

To ensure financial security for yourself and your loved ones and to plan effectively for life post retirement, you need to invest today in the right vehicles. However, how do you know what options are best suited to your risk appetite and your financial goals? This is where an investment manager comes to the rescue. An experienced investment management professional will be well versed in the best strategies for investment, while keeping himself/herself updated on the market situation at all times. They have the still to analyses your current finances and then help you choose the best assets or options for share trading in India, in accordance to your life goals. They also maintain utmost discretion while handling your finances and monitor progress to ensure that you get the maximum benefits.

share trading in India

2.    Why would I need professional investment management?

With the unprecedented amount of information and financial calculators available online, one might wonder why professional investment services are still needed. The reality is that research demonstrates that the track record of individual investors is far from encouraging. Professional investment managers have both the skill and the experience that a layperson might lack. They will be able to see loopholes, assess your risk tolerance and suggest the best options for you depending on your life goals. In addition, they will take care of all the legalities, while ensuring that your tax exposure is minimized. Also, investment management services are well worth the fees, given that they will continuously monitor and modify your portfolio to bring you the best results, while all you need to do is lay back and enjoy the benefits.

3.    Are my assets safe from theft, unauthorized withdrawal and custodial bankruptcy?

Although your portfolio manager would have the discretionary authority to invest assets on your behalf, they do not have the actual physical custody of the assets. All your investment holdings will be kept sage with the bank or financial institution. This adds a layer of security since the custodial responsibility is segregated from the management of the portfolio. You retain the right to grant power of attorney to those you whom you want to give access to your assets. In addition, the best financial institutions will also have their own risk management system and internal control that ensure that there is no unauthorized access to your assets.

Why Invest In Mutual Funds?

Timely and Smart Investments Can have Lasting Positive Impacts

Showing a strong surge in retail investor interest, mutual fund industry has seen the number of its new Systematic Investment Plans grow by 18 per cent to 73 lakh at the end of March 2015, according to an article published in NDTV profit in April 2015. Mutual funds investments are considered to be one of the most contemporary, low-cost, hassle free, transparent and regulated products that help to deliver superior returns as well as save taxes. It is managed by the expert fund managers who have years of expertise in stock markets.

How to Invest Smartly

Indians have traditionally adhered to invest in gold and fixed deposits in order to grow their wealth. Being high on risk, stock market investments also offer higher return. Although insurance maybe a great product that offers financial cover in times of need but it is not enough. With rising inflation and changing lifestyle, it is essential to plan your financial future in such a way so that you are able to maintain your standard of living. Building wealth is one way to do so. When you invest, your money helps you earn money.  Here the top steps to help your wealth grow.

1. Start Early – Warren Buffet who is considered to be the most successful investor of the 20th century bought his first stock at a tender age of 11. The push behind why to start early is because compounding is at play. The more time you give your investments to mature, the more you reap.

2. SIP – SIP or Systematic Investment Plans lets you follow a discipline in investing. You can invest small amount of money under SIPs. Investing in a good quality mutual fund in India through SIPs is one of the surest ways to ensure that you do not miss on investing and remain regular. With increase in income, you can increase the monthly investments over time.

3. Long-Term Investing – One of the golden rules of gaining from investments is investing the smart way. Often investors withdraw their money from a certain fund too soon to give it time to grow and reap returns. Invest your money in any fund on long-term basis.

4. Review Regularly – Review your investment portfolio regularly. See how a certain fund is performing. Also, withdraw your money from a fund if it has not been consistently performing poorly.

5. Understand your Investments – It is not wise to park your money in any mutual fund that you have heard of. Analyze the fund yourself, assess its past performance, understand the risks and then decide whether to invest in it.

In order to choose an investment strategy that works for you, you need to analyze your risk profile. The younger you are, the more you can afford to invest in risky ventures. Over time, when you develop confidence in your finances and have begun to meet your goals, you can choose to bifurcate your investments into those that yield fixed returns. If you follow these tips on smart investing, you will be well equipped to ride the bull into financial stability and a secure future.