Funding (Loan and Equity) : Fuel For Your Business

Cash is kind, very right said. Cash is very important for all businesses. Funding is one of the key responsibilities

Funding (Loan and Equity) : Fuel For Your Business

Cash is kind, very right said. Cash is very important for all businesses. Funding is one of the key responsibilities of an Entrepreneur, Business Owner, and Corporate CEO. Well-funded businesses grow much faster and help maintain good morale and motivation levels of all (employees, vendors, and associates) this results in best in best-in-class product/service delivery, happy customers, happen creditors, vendors, etc. Whereas, a cash-starved business struggles through many difficulties which results in a lot of employee and vendor dissatisfaction, poor customer delivery, and unhappy customers, and can lead to business closure. Therefore, adequate funding lines are of paramount importance for every business. Volody understands the funding needs of each business and can suggest suitable funding solutions based on requirements, duration, interest cost, purpose, collateral, and repayment capacity. A business can avail of any of the following funding facilities from institutions :

Equity Capital

Equity capital is one of the widely used funding options, however, normally treated as the most risky, and for a start-up business entrepreneur puts his own or taken from friends and families. Angel Funds, Seed Funds, and Venture Capital firms also invest in equity capital. An equity holder’s right in the company is established through shares, with each share representing a part ownership of the company. Equity shareholders are allowed to participate and vote in the shareholder’s meeting along with the prospects of sharing the profits of the company through dividends or share value appreciation. The rights of shareholders are governed by the Article of Association.

Equity capital is one of the most sought-after forms of funding, while also being the costliest. Further, an adequately capitalized company through equity capital is critical for maintaining the financial health of the company and meeting financial, business, and capital commitments. This also helps in availing loans from banks and financial institutions.

Preference Share Capital

Preference share capital is another popular type of equity funding that provides the investor with preferential shareholder treatment and fixed returns. Preference share capital normally requires a fixed dividend to be provided every year for each of the preferred shares, thereby equivalent to a nature similar to that of a loan from a bank or financial institution. After the maturity of time as per the terms between the investor and company, preference shares are usually with some return expectation and redeemed to provide the investor with an increased bullet payment at the end. Preference share capital can also be redeemed in tranches to make the funding similar to that of a loan. As per provisions of The Companies Act, 2013 all preference shares be redeemed within 20 years.

Business Loans from banks

Business loans are among the easier forms of funding for a business. Banks in India have well-documented procedures for providing credit/loan facilities (funded and non-funded) to start-ups, small and medium businesses (SMEs), and existing businesses and provide financing to a large number of businesses across the country. Therefore, all entrepreneurs need to consider business loans from banks as a possible option and take the help of volody.com to help you through the process and prepare your documentation to make things easier and faster. Banks provide business loans based on creditworthiness, cash flows, business strength, and capital base. Business loans are secured and unsecured. Banks take security in the form of fixed deposits, property mortgages, pledges of shares and debentures, gold, fixed assets, receivables, stock, inventory, and personal guarantees of entrepreneurs

Cash Credit Facility

A cash credit facility is a form of short-term funding to meet day-to-day fund requirements of business and it is used for maintenance of inventory of raw materials, semi-finished goods, finished goods, stores, and spares, etc. In trading concerns, the requirement of funds is to maintain adequate stocks in trade. Finance against such inventories by banks is generally granted in the shape of a cash credit facility where drawings will be permitted against stocks of goods. It is a running account facility where deposits and withdrawals are permitted. The cash credit facility is of two types (depending upon the type of charge on goods taken as security by the bank).

Overdraft Facility: Overdrawing permitted by the bank in the current account is termed an overdraft facility. An overdraft may be permitted without any security as a ‘clean overdraft’ for temporary periods to enable the borrower to tide over some emergent financial difficulty. ‘Secured overdraft’ facility is against fixed deposits, NSC, and other securities.

Commercial Paper (CP)

Commercial Paper is an unsecured money market instrument issued in the form of a promissory note, was introduced in India in 1990 to enable highly rated large corporate borrowers to diversify their sources of short-term borrowings provide an additional instrument to the investors, and provide funding to corporates.

External Commercial Borrowing

External Commercial Borrowing or ECB is a loan or debt raised from an international organization. External commercial borrowing could be commercial loans, buyers’ credit, suppliers’ credit, and/or other forms of loan provided by a foreign financial institution or supplier or investor in the Company. ECBs can be raised by businesses in India for purposes including the import of capital goods, new projects, modernization of existing projects, etc., ECBs in India are governed by Reserve Bank of India regulations and approved under the automatic route or approval route.

Debentures / Bond

A debenture / Bond is an instrument executed by the company acknowledging indebtedness to the entity to secure the funds. Debentures / Bonds provide long-term funding for a company in the debt form. Debentures can be classified into secured debentures or unsecured debentures. Debentures can be issued by a company after obtaining a Certificate of Commencement of Business if permitted by the Articles of Association of the Company and approval of the Board of Directors.

Please visit volody.com to avail our services for availing loan, equity, and other financing requirement for your business. We will help assist you in guiding you right form of funding your business requires and connect you to a financier to fulfill your funding needs. We will also help you in making your business plans, financial models, and project reports. We are a tech-enabled one-stop destination for all services of CA, CS, and Lawyers. We can help you prepare your income statement, e-file your tax return, and assist you with a refund in case it’s due.

Legal Documents for day-to-day use by individuals

General Power of Attorney (POA)

The Power of Attorney is executed on a non-judicial stamp paper of the requisite value as per the stamp duty prevalent in the respective state (Rs. 100 in the State of Maharashtra). The purpose of General Power of Attorney is to authorize someone to act on your behalf to execute financial transactions including selling assets or property.

Power of Attorney should be legally drafted to ensure that the transaction executed through the use of Power of Attorney is valid and pass the test of law. A power of attorney must be drafted/provided by a qualified expert. volody.com can assist you in drafting a General Power of Attorney for your requirement.

It is important that each page of the Power of Attorney is to be signed and wherever the blanks are filled in initialed by the Grantor (applicant executing the POA). The POA should be signed by the Attorney on the last page.

(WHEN POWER OF ATTORNEY IS EXECUTED OUTSIDE INDIA BY NON-RESIDENT INDIANS)

  1. The Power of Attorney should be first typed on a plain sheet of paper. Each page of the Power of Attorney is to be signed and wherever the blanks are filled in initialed by the Grantor (applicant executing the POA).
  1. The signature of the Grantor the should Grantor should be attested by any authorized official of the Indian Embassy / Indian Consulate / Trade Commissioner of India in India / Notary Public / Registrar in the country where the Grantor resides.
  2. The Power of Attorney must be notarized by a Notary Public.

Attestations are based on the applicable laws of the respective states. Please do write to us at connect@volody.com and we will assist you in completing the process. These officials will have to affix their stamp and signature on the Original POA. If the stamp of the Notary Public does not bear his name, then the principal office address and notary registration number must be written by hand.

Affidavit

An Affidavit is defined as a written statement of fact voluntarily made by a person under an oath or affirmation administered by a person authorized to do so by law. Such statement is witnessed as to the authenticity of that personal’s signature by a taker of oaths, such as a notary public or commissioner of oaths

As per legal definition, an Affidavit shall include affirmation and declaration in the case of persons by law allowed to affirm or declare instead of swearing.

Affidavits are very common and are filed almost in our daily lives It has been assumed and presumed that whatever assertion is stated by a citizen by way of an affidavit, can be believed to be true, and necessary action can be taken against it. Affidavits are required for starting a private limited company, passport applications, birth certificates, various registrations and to obtain a lost document, etc.

Please visit volody.com and request to prepare an affidavit as per need and we will assist you in preparing an Affidavit and guide you on contents and stamping requirements.  We are a tech-enabled one-stop destination for all services of CA, CS, and Lawyers.

Please visit https://www.volody.com/ to avail the services.

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