What are Cash-Flow based Loan Products? – Explained!

The appraisal should consider the sector’s limited access to equity sources and high dependence on debt markets, blocking of or delaying payments by vendees, inevitable delays in submitting audited financial statements. Several SMEs are bracing up to computerize their back-office operations like accounting, office administration. They are constrained by finances. It is a slow process but will happen.

Several Banks are reformulating their credit origination methodology to discuss overall business plan and revenue model that the customer owns up. Cash requirements based on work orders for each month for 1 8 months should be worked out and reviewed at half-yearly intervals for any necessary revision.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Cash deficit should be worked out each month and that should be financed by the banks to the extent of 80 per cent. Financing capital expenditure shall carry a margin of 20 per cent of deficit in case of disruption and in cash receipts should be part of the limit.

Financing capital expenditure shall carry a margin of 20 per cent of the cost price of the asset with a gestation period of 4-5 years and capitalization of interest for the first two years as part of the project cost.

The loan should be secured by a charge on overall assets of business. Collateral security can never substitute viability and every good banker knows it.

Banks should gear up to offer entrepreneurs information about industry, products, markets, etc., in addition to financial assistance and they can make use of the services of responsible small enterprise associations for such purposes and even for due diligence.