With new reforms like demonetization and GST tax structure, the World Bank is positive about India’s economy. Predicting a 7.2% growth rate of the Indian economy, the World Bank manifested its trust in the speedy growth of the country’s economic activities over this fiscal year. A fast paced economic growth is possible only if all its components grow at equally higher rates. In order to be in line with the growing trends, your business activities must also grow relatively. This enables one to take a lead in their respective businesses.

The idea of Financing

A company is run by and for fund generation. Financing is the most important aspect for existence of a company. Financing is the act of raising funds for business activities. These activities may be related to the start-up of a company, for running one’s business or expansion. Activities of financing not only help you raise funds at the required time but also help in tax saving. These financial services can be availed from banks as well as financial institutions.

There are various sources of finance in the market today. Which source should one opt for is based on the following factors:

  • Amount of money required
  • Urgency of money required
  • Options available in market
  • Risk involved in the activities to be financed
  • Duration for which money is required

 

Need for Finance

Financial needs of an entrepreneur also help him to decide what type of finance his company needs. These needs may be short term or long term. Based on the following needs listed, a client determines the financing solution as well as their financial advisor.

  • Working Capital Management – Daily work in progress lays new challenges in the path of a high business growth ambition. One requires finances to manage cash flow mismatches due to unexpected alterations in the working capital cycle, support incremental overheads as well as to overcome any contingencies regarding the working cycle.
  • Purchase of Fixed Assets – Increasing production and sales activities require purchase of new assets like machinery, vehicles etc. In order to effectively consume one’s funds in working capital activities, one may want to fund these fixed assets from outside.
  • Expansion – With business growth emerges demand for greater production capacity and more storage space. In order to expand, one may also need to establish new units in different cities. This requires heavy funding.
  • Developing new product – New product R&D, launch as well as packaging and marketing need heavy investments as well as time for the funds to yield any returns. Thus, it is advisable to use external financing for these activities.
  • Debt Restructuring – In order to restructure one’s company debts, funds which reduce costs and manage your borrowing, making your finances manageable is very important.
  • Modernization – With changing times, new technologies come into the markets. These technologies need to be implemented at faster pace as compared to your peers in order to get a lead. These technologies are comparatively more expensive than their older counterparts. These technologies require external funding.
  • Acquisition – In the process of acquisition, the business that acquires another company needs to find money to pay the owners of the business for acquiring their company.

Advice as to which financial instrument will fulfil the requirement for a specific need of money stated above should be well researched and backed with facts and figures.

Innovative Financing Solutions

Innovative financing solutions refer to a range of non-traditional financial mechanisms used to raise funds. Financial aid may be given through traditional means of loans, debt and equity instruments or modern mechanisms such as micro-contributions, taxes, partnerships and market-based financial transactions. Kotak provides a vast range of financial solutions for you to fund your aspirations. These solutions are divided into three broad categories:

  • Long Term Finance – Kotak offers various customised financial solutions for higher long term growth of an organisation such as setting up of a new unit, purchase of assets etc. Here’s a list of long term solutions that the bank offers:
  • Rupee/Foreign Currency Term Loans
  • External Commercial Borrowings
  • Off-shore Foreign Currency Loans
  • Working Capital Finance – A well-managed team of relationship managers works diligently to help you overcome your working cycle challenges and provide tailor-made financial solutions for smooth running of operations. Here’s a list of working capital solutions that Kotak offers:
  • Cash Credit
  • Overdraft
  • Working Capital Demand Loans
  • Short Term Loans
  • Working Capital Term Loans
  • Foreign Currency Loans
  • Structured Finance - Structured financing is a new concept in the world of financing solutions. It is mainly used to cater to big business houses with complex financial needs. These solutions are company specific and may also be a combination of two different financial solutions clubbed into one. Here’s a list of structured financing solutions that Kotak offers:
  • Commercial Papers
  • Non-Convertible Debenture
  • Quasi Equity Instruments – Compulsory Convertible Preference Shares (CCPS),

Compulsory Convertible Debentures (CCD),

Redeemable Preference Shares (RPS) and

Share Warrants

Detailed information of all the financial solutions is just a call away. A financial manager not only informs you about the various financing solutions available in the market but also provides advice about which financing solution will best suit your funding requirement. Kotak also assists you in performing all the formalities related to these financing solutions with minimum cost and effort. So, all you need to do is focus on the growth of your company and leave the rest for experts who have their best interest in your growth.

For all kinds of financial assistance that you may need, give us a call on 1860 266 2666

 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.