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Finance

Everything you need to know about the National Pension System

All your life’s hard work and struggle pays off during retirement, your golden years, if you have an effective retirement plan in place. A good retirement plan will ensure you get a steady flow of income after you’re done working. One such effective plan that every Indian citizen is entitled to is the National Pension System or NPS. So, what is NPS and how does it work? Let’s figure out all you need to know about NPS here so that you can get started.

What is NPS?

NPS is a voluntary retirement plan that all Indian citizens between 18-70 years of age can invest in. It’s a government scheme that even corporate sector employees and self-employed individuals can benefit from.

Not only does the NPS help you save money, but also helps in reducing your taxes as the plan is eligible for a tax deduction. You invest a certain amount of money every year which builds up a corpus fund that you can withdraw during retirement. So, the earlier you plan, the more you can benefit from it.

Types of NPS accounts

There are two types of NPS accounts:

●      Tier I account:

When you want to invest under NPS, this is the default scheme you go for at first. It requires a minimum initial investment of Rs. 500 and a minimum annual investment of Rs. 1,000. There is no limit to the maximum amount you can invest in.

Here, you get a lock-in period till the age of 60. Withdrawals are permitted only after the lock-in period unless there are special circumstances. You are entitled to a tax deduction for NPS investment up to Rs. 1,50,000 each year under section 80 C and further deductions for up to Rs. 50,000 under section 80CCD (1B) of the Income Tax Act, 1961.

●      Tier II account:

This account is completely voluntary and you’re eligible to invest here if your Tier I account already exists. The minimum initial investment here is Rs. 1,000 and the minimum annual contribution amount here is Rs. 250. There is no tax deduction or lock-in period here. This means you can withdraw from here at any given point in time.

NPS scheme details – Rules for application, investment, and withdrawals

The easy and quick way to apply for NPS is through the online portal where you need to link your account to your Aadhaar, PAN, and mobile number.

Once your permanent retirement account number is generated, you need to make the initial investment. Your pension fund manager will take care of the investments you make here, helping you select the investment mode – equity, corporate debt, or government bonds. You’re allowed to change this mode only once in a financial year.

For Tier I account, the maximum age for exiting the scheme is 75 years. After that, you are entitled to withdraw 60% of the total corpus amount you have, while the rest 40% is to be invested in an annuity scheme if your corpus amount is more than Rs. 5,00,000.

You can make three premature withdrawals throughout the tenure, given it is for children’s higher education and/or marriage, house purchase/renovation, or medical emergencies. This is limited to 25% of your total investment and only applicable for those who have invested for at least three years.

Going for an NPS scheme is important for every individual as it helps contribute to your retirement corpus. Retirement planning ensures that you don’t have to financially depend on anybody in your golden years and are financially stable even after you stop working.

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Finance

What is Factoring? Types, Advantages, Disadvantages, Mechanism

Factoring can be defined as a financial where a factoring company purchases from the customers’ accountable receivables from the sales of products or services to clients. If your clients become the debtor of the factoring company, they must fulfill their obligation towards the factor.

The factoring contract assumes that the factoring company takes the entire credit risks and the collection of the account. Factoring in Winnipeg offers companies an effective way of financing their financial needs. They also act as a tool for the collection of invoices and risk hedging.

Traits of Factoring

  • The factoring company offers money to the supplier, including advance payment and loans.
  • In most cases, the factoring period is 90-150 days. However, some factors allow more than 150 days.
  • Factoring is a cheaper source of working capital compared to loans
  • Factoring receivables is a perfect financial solution for emerging and new companies without enough cash flow. That’s because creditworthiness is appraised based on the financial ability of the client. Thus these businesses can leverage the financial power of their clients.
  • A credit score isn’t essential for factoring in Winnipeg. However, the factors conduct a credit risk assessment before signing an agreement.
  • Factoring in Winnipeg is a technique of off-balance-sheet funding.

Mechanism of Factoring 

  • A factoring agreement involves three parties: the one selling account receivables, the customer of the seller, and the factoring company.
  • The seller of the product or services who prepares the invoices is the client and is a business.
  • Customers of the client or debtors are the recipient of the invoice of goods and services offered. They owe the cash for the value of service provided or goods purchased from the seller. They pledge to pay the money within the agreed payment agreement.
  • The factor or factoring company is the service provider who buys the invoices and provides advance payment to the business.

The factor is, therefore, an intermediary between the buyer and the seller.

Benefits of Factoring 

Substitute for Business Loans

Factoring plays a vital role in working capital funding. It substitutes business loans and supplements the credit or supplier’s credit. It’s a perfect replacement for high-cost loans.

Saves Time 

Factoring in Winnipeg will save effort and time to the business spent on collecting the invoice from clients. That effort can be channeled to other company expanding initiatives such as marketing, customer development, and sales.

Non-Collateral Needed

Unlike conventional bank loans, factoring does not require you to risk your property or home as collateral.

Minimal Operating Cycle Time

The average invoice collection period is lessened, and as a result, the total operating cycle duration of the customer is lessened.

Liquidity 

Factoring in Winnipeg helps the business raise the money, up to 90 percent of the receivable value instantly after the sale. That builds up the liquidity position of the customer.

Advisory Services

Factoring companies provide a range of advisory services to their customers, including credit evaluation for their overseas buyers.

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Finance

Investing guide for people looking to invest in Exchange Traded Funds

An Exchange Traded Fund (ETF) is like a basket that contains shares, bonds, etc. and can be traded on an exchange. It tracks an underlying index, either Nifty or Sensex, and holds assets in the same proportion as the index.

Looking to invest in ETFs? Here are some tips that could make your investments work for you –

  • An ETF fund could give good returns, but you as an investor should remember that not all investments provide positive returns. Hence, you should restrict your investment using limit orders where instead of waiting for a huge profit or recovery from a bad loss, the investment will be transacted at a good reasonable price that will benefit and save you from a loss. You need to set the limit on the order, and the rest will be taken care of.
  • It is advisable to begin trading a few minutes after the market has opened or before the market will close of the day. These are the periods when there is comparatively more volatility in the market. Following this advice could be beneficial in knowing the true value of stocks.
  • If you are not sure of the trade, you should seek professional help from the fund manager before investing big time. Essentially, an ETF is a market-based investment, and all market-based investments are subject to market risk. Any fluctuation in the market will impact an ETF, and though it is a diversified portfolio, there cannot be an assurance that it won’t incur a loss.
  • Always watch out for spread; a spread is a gap between a bid price and an ask price, where the bid price is the price on which investors are willing to buy while the asking price is the price on which investors are willing to sell. The difference between bid and ask is spread, which widens or narrows down according to market conditions. The transaction should be based on this spread as it determines the profit and loss of the investment.

These are some of the best ETF trading tips; however, if you are trading in an ETF for the long term, you should keep in mind its taxation benefits, brokerage charges, transparency of the trade executed by the portfolio manager and returns on investment promised by brokerage firms.

To make your ETF investments simpler and to explore more stock and mutual fund investment options, you could also reach out to a financial expert to curate bespoke financial plans that are in line with your risk tolerance, investment goals and horizon.

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Finance

Capital Solutions for Life Science Innovations

If you have an idea for an innovative new healthcare product, either a drug or a piece of equipment, or a therapy, you will need capital to develop and market that product.  At SWK Holdings we specialize in providing capital to life science businesses that are developing new ideas.

Often, a life sciences company will find it difficult to obtain capital in the usual ways.  For example, when trying to develop a new medication, a scientist cannot offer up the usual collateral that a bank or a traditional loan company would require to secure a loan.

Different Stages in the Development Process

Pioneering a new drug requires inventive capital solutions.  Most people believe that pharmaceutical companies are rolling in money so they should have no problem footing the bill for new therapies.  Whether or not that is true, the pharmaceutical companies don’t get involved in developing new drugs until close to the end of the process.

This discovery phase of drug development does not have such a need for capital solutions. The National Institutes of Health and other federal government entities have historically provided funds for the discovery stage.  In addition, state governments have lately been more involved in funding the discovery part of drug development.

At the other end of the process in the late-stage development time frame, is where pharmaceutical companies get involved and put their money into the development of the drug.  Again, the scientists won’t need capital solutions at this stage.

The Capital Gap

The time between the initial discovery research and the late-stage development is the time when novel capital solutions become critical. Sometimes charitable foundations will fund this stage because they are looking for drugs for a rare disease.  But most doctors, scientists, and life sciences companies are left to look for funding on their own.

A smaller biopharmaceutical company that wants to develop a new medicine must also look for a financial company that can offer advanced types of capital solutions for the middle part of the development project.

Since investment companies are not subject to the same regulations as banks are, they can typically do things that banks can’t do. They can individually tailor their loans to companies.

Asset Purchase

One of the ways an investment company can help out with innovative financing solutions is to purchase the asset.  Sometimes an investment company may purchase the drug being developed and fund it to market when it is ready.

Structured Financial Products

When a life sciences company needs major capital, it can seek out a structured financial product from a specialized company that focuses on life science innovations.  This type of loan would not be available from a conventional bank.

Structured financial products usually involve combining financial assets, and then selling these financial assets to investors.  One structured financial product is a credit-linked note.  This loan is structured to shift some of the risk of the loan over to the investors.  In return, the investors enjoy a high rate of return because their investment is riskier.

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Finance

What Are the Top-Most Creative Capital Solutions in the Finance Industry?

The right capital investment is the backbone of each and every business. Without the support of working capital, none can sustainably manage the cash flow, cost reduction, risk reduction, etc. This is why it’s really important to follow the most creative capital solutions which will be functioning just right for a small company. Small or big every business has a different financial situation and so an organization should adopt capital solutions depending on its strategies and programs.

Key goals of capital management

 

  1. An efficient capital solution is crucial for maintaining smooth operations and improving the profitability of a business.
  2. Creative capital solutions play a vital role in managing different company activities including debt management, inventory management, revenue collection, and much more.
  3. This method also identifies the areas which need more attention to maintain profitability and liquidity.
  4. Working capital management is essential for every business. This ensures that the business has enough liquidity to meet its short-term obligations.
  5. A capital solution maximizes the return on current asset investments by covering unexpected costs.

This article will focus on the top five capital management solutions that will maximize cash flow.

  1. Days Sales Outstanding (DSO): It is the average measurement of a business’ debtor exposure. The DSO helps in measuring the level of outstanding revenue at the end of a month based on the number of days sales/revenue represented by accounts receivable balance. This method is useful in detecting the gap between DSO and BPDSO.
  2. Days Inventory Outstanding (DIO): This is the financial and operational measurement that expresses the average number of days that the company takes to sell its inventory.
  3. Electronic Invoicing: This is one of the most creative capital solutions that can help a company to achieve working capital benefits. The streamlining of the invoicing process automatically minimizes the risk of errors, making sure the consumers are receiving it as soon as possible.
  4. Supply chain finance: For the buyers, it’s also popular as reverse factoring which enables them to offer early payment to the supplier through third-party funders. The supplier can boost the level of DSO due to the early payment at a low cost of funding.
  5. Flexible funding: The working capital providers also offer flexible funding that will help a buyer to move smoothly between supply chain finance and dynamic discounting models. It is effective for a risk-free return on the excess cash of a buyer.

Conclusion

These were some of the most creative capital solutions that are being used by businesses worldwide. There are too many capital partners who help the clients to determine the best strategy to access new sources of capital more efficiently that deliver enterprise goals. The capital advisory experts have unique knowledge of the insurance marketplace that effectively enables the clients to maximize their returns. So, stabilize the cash flow with the use of working capital solutions and meet the growth plans.

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Finance

5 Top Mistakes Every Home Loan Applicant Must Avoid

A home loan is an affordable way to buy your dream house. Getting a home loan is a simple process. Compared to other types of loans, a home loan has longer-term and includes a larger amount. That’s why you should research the loan terms and conditions before settling the deal. Then, you must use the online home loan calculator to find the best deals on housing loans.

In the meantime, let’s check out the common mistakes homebuyers should avoid when applying for a home loan.

1.   Not Comparing Offers

Banks have different offers on home loans. Every bank has varied:

  • Interest rates
  • Repayment term
  • Eligibility criteria
  • Processing fees

Just because you are in a hurry doesn’t mean you should get a home loan from any random lender. Instead, research well and get a loan from a bank that offers the best interest and a flexible repayment plan. Use a home loan interest calculator to compare interest rates. You can also call the banks to ask about the processing fees and tenure.

2.   Not Checking the EMI (Equated Monthly Instalments)

EMI is the monthly instalments paid to the bank. The EMI varies depending on the term of your home loan. If the loan has a longer term, you will pay a smaller EMI. Short-term loans (the ones that are to be paid within 5-10 years) have a large EMI. You should check the EMI and compare it with your repayment capacity. Get a loan only if you can afford the monthly loan payments.

3.   Not Checking Your Credit Score

It is a 3-digit numerical value that shows your creditworthiness. Banks check your credit or CIBIL score to understand your credibility. It is calculated based on your past debt repayment records. The score can be anywhere between 300 and 900. You need a good credit score for a quick home loan application approval.

Always check your credit score before applying for a housing loan. It is available for free at www.cibil.com.

4.   Not Having Enough Money for the Down Payment

Bank asks you to pay a down payment – 10% to 20% of the total cost of the property. After that, banks pay up to 90% of the cost of your property while you pay the rest. Your home loan application is accepted only when you have enough funds for the down payment. So, check if you can arrange the down payment before applying for a home loan.

You only repay the amount you borrowed from the bank. For example, the 10% of the amount you paid from your pocket as the down payment is not included in the loan balance. You only repay the 90% borrowed amount.

5.   Getting Home Loan at Higher Interest

Always use a housing loan interest calculator when applying for home loans. Banks offer home loans with fixed-rate and floating-rate interest. The fixed-rate interest is a good option for borrowers who want a stable interest rate throughout the term. The interest does not remain the same in the fluctuating-interest loans.

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Finance

Top Reasons to add savings account in your financial portfolio

When it comes to money, being cautious means saving it for occasions when you might need it the most. It could mean getting repairs done in your home or covering sudden medical expenses. With these goals in mind, you always try to save more money than you did last year.

Regardless of how you save and how much you save, it is crucial to decide where you are going to put this money. Many often think about putting it into investment options. But that is a risky option if you simply wish to have more money on your hands. In such a situation, your best option is to have a savings bank account. Here are few reasons that make savings account the best option to store your money:

Safe option to store money

Savings accounts give you a great deal of safety when it comes to storing your money. The biggest sign of safety is that you can deposit or withdraw money from your savings account with ease. This way, you do not have to find a place to store cash. Moreover, you don’t have to carry cash with you all the time.

Digital banking services

The government has been making a lot of efforts to promote digital payment options. With newer payment options and more opportunities to make digital payments, these efforts made by the government only need to be complemented by people willing to adopt a new way of making transactions. For people with a savings account, making the transition to digital payments is much easier. This is because online savings accounts offer digital banking facilities like net banking, NEFT, RTGS, IMPS, UPI, etc. This way, you do not need to go to your bank branch to make any transactions.

Government scheme benefits

The government has taken a lot of initiatives to improve personal finance practices in the country. One of those efforts is to promote savings accounts for everybody. To do so, they have paired a lot of their schemes to saving accounts. For example, the benefits and subsidies that you may receive from various government schemes will be deposited into your savings account. In such a case, not having a savings account could cause trouble in receiving those benefits. Moreover, having a savings account also helps you in getting these benefits directly. There are no middlemen to be concerned about and much less processing.

Income through interest

The main reason you save money is to spend it on something later. But until that time comes, leaving it lying around does not do you any good either. Hence, you need to make sure that your money works for you. You can use your savings account for this as well.

When you take a loan, you pay a certain percentage of the principal amount borrowed as interest. It serves as the fees for taking the loan in some way. This mechanism is reversed in the case of a savings account. When you open a savings account, you give your money to the bank for safekeeping. Hence, the bank pays you interest for holding that money. This means that you earn more money by simply putting your money into a savings account. Moreover, the interest you get paid is decided by the interest rate. This means that the more money you put into the savings account, the more interest you earn.

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Finance

How to redecorate your Home for the Festive Season 2021

As the festive season approaches, it is time to set things in motion and kickstart the celebratory season. What better way to celebrate than by doing so in your own home? The festive season brings with it a number of attractive discounts and offers that can entice you into wanting to make purchases. However, not all of these commodities are affordable and some might only be able to pay them with the aid of equated monthly installments (or EMIs). Home décor and furnishings for instance are expensive. Read on to understand how to redecorate your home for the festive season this year.

Décor 101 – Need vs Price

Redecorating your home during the festive season is strongly encouraged as the new furnishings and wares bring with them new, positive vibes that are much needed during this time. Moreover, they add a fresh look to your home and as we are now spending a lot more time indoors it is important to be comfortable in the space in which we reside.

Now, despite the fact that redecorating your home during the festive season is encouraged, it isn’t always affordable. The price of home furnishings has been on the rise and not everyone can spare the money when they have other expenses to account for each month.

The ability to pay for furniture with EMIs is, therefore, a blessing. The Bajaj EMI card entitles you to the same such that you can shop stress-free!

Furniture Bought via EMIs

The Bajaj EMI Network Card lets you shop for furniture by converting each of your transactions into EMIs. These purchases can be made at its online partner stores of which there are several.

Buying furniture on EMI is easy and you have the option to choose from a wide range of furnishings including but not limited to sofas, storage cabinets, beds, shoe racks, and beds.

The Bajaj Finserv Partners online marketplace has a number of stores under its belt and boasts partnerships with stores like Hometown, Pepperfry, and Nilkamal among others.

As a buyer, all you are required to do is visit the partner stores’ websites or peruse their products on Finserv MARKETS and select the products most viable for your home. Use your EMI card in order to make your payment at checkout such that you can successfully buy furniture online.

No Cost EMIs

No cost EMIs imply you are not required to pay any additional interest on the principal. In layman’s terms, this means that you aren’t charged with any EMI in addition to the cost of the product itself.

You can buy a wide range of furnishings with no-cost EMIs applicable on the same. This means you can buy home decor online with Bajaj EMI card or a sofa, study table, or recliner. The options are endless – all you’ve got to do is explore the offerings and select what you think serves your needs best. 

Benefits of Buying Furniture Online

For those of whom are uncertain about buying furniture online, it brings with it a number of benefits that aren’t available when visiting physical stores. These benefits include the following.

  • Hours of operation – When shopping online for furniture you have the freedom to peruse the product offerings at a time that works best for you. You are no longer dependent on or have to follow store timings.
  • Location – As opposed to having to make a trek to a furniture store, online shopping for furniture can be done in the comfort of your own home or anywhere of your choice for that matter.
  • No pressure – When you shop for furniture online you aren’t pressurized by a sales assistant to make a purchase. Instead, you have the freedom to come back to a product as often as you’d like before making a decision.

Conclusion

Shopping for furniture online has never been easier and ought to be taken advantage of this festive season. Visit the Fiserv MARKETS online to discover more offers today!

References:

https://www.dailypioneer.com/2018/business/EMI-festival-offers-on-consumer-products–happy-dushhera.html

https://www.bajajfinservmarkets.in/emi-card/buy-furniture-on-emi.html

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Finance

Everything you need to know about Kisan Credit Cards

The Kisan Credit Card Scheme (KCC) was introduced in 1998 by the Ministry of Finance, Government of India, to help the farmers/cultivators with the farming and agriculture-allied activities investments. The loan issued under the KCC scheme has a minimal interest rate of 2% to 4% and is available to cover a host of activities, including post-harvest costs.

What is the scheme?

The eligible beneficiaries can apply for the Kisan Credit Card both online and offline, depending on their access and ease of usage of the platforms. Under the scheme, the eligible beneficiaries (list at the bottom of the blog), can apply and get a loan of up to Rs.3 lakh. They can get loans for the marketing of the product. Other benefits of the scheme include:

  • KCC scheme beneficiaries get an insurance cover of Rs.50,000 in the case of permanent disability or death and a cover of Rs. 25,000 considering other associated risks
  • Beneficiaries will get a savings account with a substantial interest rate. They will also receive a smart card and a debit card, along with the Kisan Credit Card
  • The eligible farmers will be granted repayment options for up to 3 years and once the harvest season is complete.
  • Eligible farmers will receive constant help in the purchase of fertilizers, seeds, etc. They will also get help in bargaining and availing monetary discounts from merchants and/or dealers.
  • No collateral is needed for loans up to Rs.1.60 lakh.

How to apply for a KCC loan?

One can apply for a KCC loan by either visiting their bank branch or applying for the KCC card online. For online, the application must go to the website of the bank branch one would want to seek a loan from. For offline, visiting the branch and furnishing all the relevant documents is required.

Following are the Kisan credit cards documents required while application, both online and offline

  • Filled application form
  • Copy of any identity proof documents. It could be Aadhar Card, PAN card, driving license, ration card etc.
  • Documents of land owned
  • Copy of document validating the applicants’ permanent place of residence
  • Passport-size photograph of the applicant
  • Any other document subject to request by the issuing bank as a form of security

Eligibility

As per the Reserve Bank of India circular, the following are the categories of people who would be eligible for loans under the KCC scheme

  • Farmers, this includes both individual and joint borrowers who are own the land and cultivate
  • Tenant farmers, oral lessees & sharecroppers
  • Self Help Groups (SHGs) or Joint Liability Groups (JLGs)

To sum it up:

The Kisan Credit Card Scheme is a great tool for farmers who need investment before the harvesting season begins. The information on how to avail of the facility should be disbursed across, so every potential beneficiary would know where to go for help.

References:

https://www.bankbazaar.com/kisan-credit-card.html

https://www.rbi.org.in/commonperson/English/Scripts/Notification.aspx?Id=2311

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Finance

Understanding what is mutual fund redemption and how to redeem

Mutual fund redemption is when investors want to sell their mutual fund units or holdings. If there is an exit load, investors need to pay it upon redeeming their units. As a result, they receive taxable capital gains when they redeem their units. Capital gains are taxed differently depending on the type of fund and the duration for which the amount was invested. Therefore, investors must evaluate all the costs associated with redeeming their mutual fund investments.

Online mutual fund redemption process

You, as an investor, have the option to either specify the units you want to redeem, the amount you want redeem, or if you want to redeem your entire investment in that mutual fund scheme. One way to redeem mutual funds is through an online process. You can visit the mutual fund’s official website.

  • Select online transactions
  • You will need to log in to the website using your folio number and your Permanent Account Number to access your mutual fund
  • The next step is to choose your plan and the number of units/amount you want to redeem
  • After that, you can confirm your transaction and complete the process

What are the other options to redeem mutual fund units?

You can redeem your mutual fund units using any of the ways listed below if the cause for redemption is clear and finalised.

  • Directly through your AMC: You could redeem your mutual fund using the asset management company’s (AMC) website if you invested directly with the AMC. Units can also be redeemed in person at the AMC office. You will get the amount by NEFT or a cheque delivered to the registered address once your request is processed.
  • Using a trading or depository account: If you purchased mutual funds using a demat account or a trading account, you can redeem your units using the same account. Following the completion of the procedure, an electronic payout (NEFT or IMPS) will be initiated in response to the redemption request. The funds will be sent to the same bank account to which your demat account is linked.
  • Offline via a distributor or an agency: Mutual funds purchased from several AMCs can also be redeemed through central systems. Download a redemption form and return it to the nearest CAMS office, filled out and signed.

When is the right time to opt for mutual fund redemption?

Investing in mutual funds can help you to achieve financial goals; however, there could be certain conditions that might make you exit a scheme before it earns attractive returns for you. A few of these conditions could be personal, wherein selling your mutual funds units is a wise call.

For conditions that solely depend on the market situation and the performance of the fund, it is likely that some professional guidance could go a long way in making your investment work well for you. This is where financial advisors step in with bespoke investment plans and timely alerts to aid your goal of short term or long term wealth creation, while taking into account your risk appetite.

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