What is Financial Literacy for Entrepreneurs?
From the past two decades, the numbers of entrepreneurs are growing swiftly in India. There are numerous young adults who have set up their business at an early age.Their knowledge on finance has helped them to run successful businesses.
Basically, the regular financial decisions are made by the business owner & their managers. Their complete knowledge on finance enables them to make profit in the business.
What is financial literacy?
Financial literacy refers to the ability to acknowledge and use financial skills. It includes
- Investing ,&
- Management of personal finance.
Financial literacy helps you to build links with money for business success. It supports various life goals such as
- Retirement savings,
- Running a successful business and more.
You can be less liable for financial fraud. It will be in case, if you are literate in finance.
What is the relevance of financial literacy for business?
Financial literacy is important as it will provide you-
- Knowledge of key concepts in accounting
- A solid knowledge of your crucial financial reports
- An insight of the basic difference between profit and cashflow & the way to recover both of them.
- Knowledge on how to handle expenses and income throughout the year.
- Methods to save time and run executive tasks.
- Better knowledge of managing creditors and debtors.
- Knowledge on other information like Sales conversion, Stock, etc.
What are the benefits of financial literacy?
The benefits of financial literacy are:
- Insight of business in a better way.
- Less error in financial reports.
- Ability to better handle and control cash flows.
- Aware and prepared tax position.
- Skill to analyze the future growth of business.
- Understand decisions on financial conclusions made by you.
- Ability to modify financial reports.
What are the provisions of a loan without collateral?
Collateral refers to a security to save interest on the loan. It is a guarantee given by the receiver. You can refer your bank to provide a loan without collateral. This will be beneath the CGTMSE scheme. You can visit www.cgtmse.in before visiting your bank.
Note: CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises.It is a joint trust set up by Government of India & SIDBI. This trust provides credit guarantee to financial institutions that provide loans to SMEs and MSMEs.
Credit Guarantee Trust
The Credit Guarantee Trust is a joint initiative. It is between the SMSE and SIDBI. The major aim of this trust is to offer credit to the SME sector. You will not need any collateral and guarantee from a third party.
The CGTMSE will offer coverage facilities of up to 5 lakh.
The institution member or the borrower will carry the charge of annual and Guarantee fee. These charges are applied by CGTMSE.
The RBI has given instructions to all the banks related to collateral security. It states that the banks will not take the collateral security for loans of up to 10 lakh. The bank will provide loans to the SME sector.
General Credit Card (GCC)
The farmers who are not entrepreneurs can take credit. It is for both- term loan and working capital. The non-farm businessmen can fulfill their loan requirements through a General Credit Card from their bank.
A GCC is a compatible smart card/credit card. This card is biometric enabled and can be used in hand-held swipe machines & ATMs. The card is capable to store enough personal info of the card holder. If the accounts are not operated digitally, the GCC can be issued as credit-card cum passbook. It will include the
- Details of borrowers limit,
- Account holder photograph,
- Valid periodicity, etc.
As of now, it will serve the facility to record ongoing transactions and as an identity card. The bank will fix the limit on the card on the basis of risk assessment. Also the limit fixation will differ from case to case. The bank will decide the loan’s rate of interest taken via GCC.
What are the actions you will take for a loan application?
- Prepare a business plan and estimate the requirement for the fund. In addition, you can visit the authorized site- Udyami Mitra Portal.
- Get a number for loan application and acceptance for the application.
- Receive fast response from the portal or bank on the application queries.
- Follow your applications for sanctions or rejections of the loan.
What is the timeline recommended by the BCSBI for the clearance of loan application?
The banking codes and standard board of India ( BCSBI) has offered a timeline to clear all the loan applications. These applications must be completed in all respects with documents attached according to the checklist. The banks that are enrolled in the BCSBI should follow exact rules mentioned below:
- Enhance the current or new credit limit for MSME loan application. It will be upto Rs. 5 lakh: 2 week.
- The credit limit which is more than Rs. 5lakh to 25 lakh: 3 Week.
- The code does not overrule the supervision instruction stated by the Reserve Bank of India.
- The banks will follow the RBI instructions from time to time.
What are the other initiatives for MSME?
The other initiatives for MSME are as follows-
1. Certified Credit Counselors (CCC)
The CCC enables you to easily apply for MSE loans at any bank branches. These bank branches are registered in SIDBI. These counselors can also help you to make business decisions.
Note: SIDBI stands for Small Industries Development Bank of India. It is a primary financial institution for the MSME sector.
2. Trade Receivables Discounting System (TReDS)
The TReDS aids you to provide discounts to the buyers at the time of making payments. RBI has licensed three bodies to operate the TReDS system. They are-
- RXIL- Receivables Exchange of India
- A. TReDS- Also known as Invoicemart. It is a digital invoice discounting platform.
- Mynd Solutions – A well known global business technology and process company. It enables accounting, finance and HR solutions
Financial literacy authorizes entrepreneurs to take liability for every pound, dollar or euro. It helps them to simply measure cash flows and keep greater emphasis on costs. They are vital to maximize business growth.
The knowledge of finance will aid you to deal with the professionals in a better way. It will ensure the stability of business accounts. Moreover, it can manage your money and time.