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The COVID-19 lockdown has put pressure on small businesses by increasing their cash crunch. With slower sales, lack of cash can become a huge hurdle in growing your business.

Razorpay is listening and has introduced Cash Advance. You can now withdraw cash instantly whenever you need.

We spoke to over 50 Razorpay businesses in the last month who expressed the financial obstacles that they come across while growing their business. One common concern was the unavailability of cash between delivering the order and getting paid. What they need is quick access to money without any fresh application every time they need cash for business needs. We asked them, “What if you were able to borrow up to ₹1 lakh for a week or two in a couple of seconds?”

Let me illustrate their response with the story of a fashion goods manufacturer. He had procured raw materials from vendors and manufactured the final product. The product was then listed on an e-commerce website and also distributed to showrooms. In both cases, he will not get sales immediately or even get paid as soon as the sales happen. After the seller manages to sell his products, they will keep a buffer time (in case the buyer asks for a refund or replacement) till they actually pay him his earnings. 

This considerable amount of time between listing the product for sales and actually getting paid is the manufacturer’s sales cycle and is highly unpredictable. If this cycle is delayed by even a few days, the manufacturer’s next round of orders may suffer as he won’t have enough cash to pay vendors or employees to keep going. This means that he can’t produce goods at a growing rate, which directly affects business growth!

We, at Razorpay, saw this as a major obstacle for growing businesses and this is how Razorpay Cash Advance came into being. Get a facility to withdraw instant cash and pay interest only when you withdraw.  You can apply to enable it by submitting a form in 30 seconds here

 

This is fundamentally similar to a line of credit or overdraft solution for businesses that have partnered with Razorpay. These businesses get access to funds from leading NBFCs through Razorpay in addition to the payments that they receive through Razorpay. Businesses can withdraw money anytime and the money will reach their bank account within a few seconds (<10 seconds in 99% of the cases).

Businesses can withdraw money anytime and the money will reach their bank account within a few seconds (<10 seconds in 99% of the cases). Click To Tweet

The money will be repaid by the businesses from future payments on Razorpay Payment Gateway; virtually getting you your payment in advance. Furthermore, the money that they withdraw can be used for ATM withdrawals or any debit card/net banking payments, thus giving the flavour of cash lying in your bank account.

Ready cash can be a saviour for your business, especially when you have an unplanned payment to make. It is necessary for small and medium-sized businesses, usually transacting in cash, to have access to instant cash reserves. Even if you have planned your business finances, surprise expenses might land your business’s growth plans in trouble as illustrated by the example above. 

To solve this problem, a business can opt for short-term financing options. But how do you decide if Cash Advance is the right product for you? Let us guide you through!

Line of credit vs. Loan

Cash advance is modelled on the conventional line of credit or overdraft solution but designed especially for small and medium businesses. How is it different from loans though? Both line of credit or business loans are financial products available to businesses, but they differ from each other in many prospects. Talking about the differences, here comes the first parameter, Interest rates!

Usually, business loans have a fixed interest rate. The payment remains the same throughout the term of the loan. On the other hand, lines of credit may have a flexible interest rate and repayment terms. Although interest rates are lower on lines of credit as compared to loans, the payment might fluctuate with respect to interest rate changes. 

Another parameter for the difference is, loan structure and repayment terms!

Business loans are borrowed for a specific term, say three or four years – or even longer, in some cases. They are repaid in equal monthly instalments – consisting of principal and interest for the entire tenure of the loan. 

Line of credit works differently. In this case, the lender provides a credit limit to the borrower and allows him to utilise the limit for a predetermined length of period. Like a credit card, the borrower can use the amount for making purchases and repay them after a particular period. And, then again use the credit limit over and over again to make other purchases or payments. This provides long-term flexibility to businesses as compared to a loan. 

Launching ‘Cash Advance’- Line of Credit for small and medium businesses

After working capital loans, Razorpay wanted to increase accessibility for small and medium businesses to other forms of loans also. Cash Advance will provide a line of credit to MSMEs that suffer unplanned cash requirements quite often.

Razorpay will approve your application under 3 days so that you can borrow money instantly in future whenever you need at a nominal fee. Once Cash Advance is enabled for you based on your past customer transactions, you can withdraw money, repay and borrow again from the approved credit limit. 

Razorpay will approve your application in under 3 days so that you can borrow money instantly in future whenever you need at a nominal fee. Click To Tweet

Here are the benefits that you will receive from Cash Advance: 

  • Withdraw instantly in seconds without a fresh application every time
  • Get your expected revenue in advance and choose a day to repay from a future settlement
  • Pay interest only on the amount withdrawn and number of days used

Don’t run out of cash and don’t stop growing! Get approved within 3 days and enjoy uninterrupted growth with Cash Advance.  

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Abhirup Bhabani
Author

Building products to solve core customer problems.

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