Shanthala Chits could be your trusted business funding partner!

December 9, 2022 Anuradha C Personal Finance

Wondering how a Chit fund company can act as a funding partner for business enterprises? Funding your capital expenses, expansion plans, working capital – can Chit funds help? The short answer is YES, VERY MUCH. We’ll tell you how!

Shanthala Chits has been a trusted chit fund company in Bangalore since 1996. We are registered under the Chit Fund Act of 1982, Government of Karnataka. We have been bringing to you, stories with real life scenarios on how we can be your investment partner for various occasions in your life.

Most SME entrepreneurs use their personal finances to fund their ventures with seed capital (Initial investment to kick start your business). Once the business takes off, they are ready to seek additional funding to scale their business.

Traditional methods for raising capital for a new business are:

Taking bank loans
Seeking venture capital from Private Equity funds
Listing the company on the stock market through the IPO route
Taking on new partners who can pool in their capital

Today, we bring you a story on how Shanthala Chits can serve as your perfect business partner with a smart funding strategy.

A typical growing business will have a clear expansion plan mapped out for the short to medium term. Short term financial planning is to arrange working capital for day to day operations. For expansion goals over the 2-5 year horizon, the planning needs to be done right now. For both short and medium term financing, chit funds are suitable. Let’s see how.

There are several aspects to finance management of a business entity – initial funding, working capital, purchase of assets and machinery, tax considerations, salary payments, raw materials purchase and so on. Though the detailed financial planning may vary depending on the nature of business, these are common aspects that every entrepreneur would need to consider.

Before we get down to solving a problem, we need to define it clearly first. Before seeking funds, a business owner needs to define his financial position in terms of:

Revenue (monthly/quarterly)
Input costs – material, manpower, marketing and so on
Debt liabilities
Tax liabilities
Profit / loss (After tax and debt repayment)

Mounting debt is one of the key reasons for businesses shutting down. When the revenues are low during the bad times, it is still possible to stay afloat, if the business is not in deep debt. Because, even if you don’t make a single rupee in revenue, you need to repay your debt. The interest liability adversely affects your working capital position. Any payment defaults may result in massive penalties, making it unsustainable to keep the business running during prolonged periods of low revenue. Chit funds are a much better way to manage your capital needs. Chit funds by design are a dual purpose financial instrument. They are an easy mode of saving as well as borrowing.

In a chit fund scheme, even if you pull out the entire amount early, your monthly payments cover both the principal and interest. Thus leaving you debt free at the end of the tenure.

Chit funds for working capital and short-term financial needs:

Working Capital = Manpower cost + Material and operations cost + debt + taxes.

In the present economic situation across the world, most business surveys point out that a working capital crunch is the biggest reason for SMEs to fail, even though they have a reasonably healthy order position. The fixed commitments such as salaries, bill payments, loan EMIs or tax obligations are to be mandatorily met.

Chit funds can come to your rescue here. For raising working capital, if you are used to availing an overdraft, a chit fund would work much better. That is because the repayment you make every month only covers the interest when you avail of debt. Whereas with a chit fund scheme, even if you pull out the entire amount early, your monthly payments cover both the principal and interest. Thus leaving you debt free at the end of the tenure.

Chit funds for 2-5 year expansion plans:

In order to meet medium term expansion goals 2-5 years ahead, you can consider routing a part of your profits earned today, into a chit fund scheme. The lump sum will be at your disposal when you need the capital 2 years ahead. For longer tenure plans, you can reinvest the amount for successive terms.

Your money would earn a healthy 7-9% return on investment when you retain the money without withdrawing till the end of the tenure. Anywhere in the middle of your investment tenure, if you are in a financial emergency, you can withdraw your prize money with minimal documentation and continue to pay your monthly installments. No heavy interest burden such as in credit instruments like seeking a loan.

Shanthala Chits has been in the business of chit funds for over 2 decades now. We are a Government registered & regulated chit fund company with a thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our customer satisfaction and secure investments.

You can pick a chit scheme with a low monthly installment for working capital needs. And opt for a larger prize money scheme for raising capital for expansion plans. Our Chit schemes range from a monthly contribution of Rs 8000 to Rs 1,00,000 to suit every budget. Our chit schemes are for a tenure of 25 Months.

Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.

Author
Recent Posts

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!