Did you know? India has one of the oldest textile industries in the world. Throughout the course of world history, Indian textiles have remained a fascination in the middle-eastern and western societies. Today, textiles exports contribute almost 11 per cent to the total export by the country and the textiles industry provides employment for millions. Approximately, there are 40 million workers in the textiles industry and another 60 million who are indirectly associated with it.
The textile industry in India has a couple of broad segments. The first is the unorganized segment which includes handloom, handicraft and sericulture. These are operated at smaller levels and often manufactured through traditional tools and methods. Then there is the larger organized segment which includes spinning, apparel and garments manufacturing for local and international clients. Manufacturing in this segment is based on the use of modern machinery and techniques like the economies of scale.
In terms of market size, the Indian textiles industry is worth USD 108 billion, which is expected to reach USD 223 billion by 2021. Apart from providing employment to an estimated 100 million people, the industry contributes almost 5 per cent to the country’s Gross Domestic Product and 14 per cent to the Index of Industrial Production. Currently, the industry is witnessing a growth in investment and market activity. The industry has attracted Foreign Direct Investments to the tune of USD 1.85 billion between April 2000 and March 2016. The Government of India has also come up with several export promotion policies for the industry, allowing up to 100 percent FDI in the sector under the automatic rule. Also, there are plans to set up India’s first integrated textiles city in the state of Andhra Pradesh.
The path ahead for the Indian Small and Medium Enterprises in the Textiles Industry
The future looks bright for the Indian textile industry both for the large-scale and the SME section. There is a marked increase in domestic consumption and export demand also looks strong. As consumerism and disposable income of the middle-class continue to rise, more new international players are expected to enter the market. For example, Marks & Spencer, Guess, and Next have come to India within the last decade. India’s organized apparel segment is expected to grow at a Compound Annual Growth Rate of over 13 percent over a 10-year period. The SME segment, that deals mainly in handloom, handicraft and sericulture, is also benefiting from e-commerce. Several online platforms have come up in the last few years which are promoting the domestic textiles and have helped in expanding their customer reach in India and abroad.
How to start a textile business?
Follow below steps to start a textile business in India:
- Industry Research : Industry research is important before starting a business as it helps identify gaps that can be filled and the overall state of the industry.
- Business plan : Having a textile business plan is essential, as it helps identify and realize short and long term goals.
- Branding : Branding is essential as it differentiates your business from the competition.
- Suppliers : Reliable suppliers are important as it helps to source material at the right price consistently.
- Capital : Textile business startup costs can be high. It is imperative to arrange for capital to ensure business viability.
Getting a loan for textile business
If you are a small business owner in the textile industry, you can benefit from a slew of government initiatives, such as:
- The tie-up between the Department of Handlooms and Textiles has and nine e-commerce players and 70 retailers for increasing the reach of handlooms products. It will generate better prices and continuous business for SMEs in the textiles sector, and facilitate direct access to markets and consumers for small weavers. This tie up will benefit small traders more as it will increase their access to a wider and more matured marketplace with a high number of returning customers.
- In addition to the 5 percent interest reimbursement provided for specified technical textile machinery, the Revised Restructured Technology Upgradation Fund Scheme (RRTUFS) now covers manufacturing of major machinery for technical textiles for 5 percent interest reimbursement and 10 percent capital subsidy. This means that the cost associated with borrowing for new equipment will go down significantly, enabling the entrepreneurs in this space to retain more earnings, thus increasing profitability.
- The Scheme for Integrated Textile Parks (SITP) provides aid to the extent of 40 percent (with a limit up to ₹ 40 crores) for the creation of infrastructure in the parks. This infrastructure will have a huge positive impact on the smaller players, as it will give them an avenue to conduct business while being in the hub, which helps in many aspects like making it easy to find reliable suppliers, etc.
- The major machinery for production of technical textiles gets a concessional customs duty of 5 percent. This concession in custom duty will enable the fabric business entrepreneurs to import more modern machinery, at relatively lower prices. This influx of modern tools and machinery into the country will help the broader industry produce better products more efficiently.
- Specified technical textile products are covered under the Focus Product Scheme. The export of these products is entitled to a duty credit scrip equivalent to 2 percent of freight on board (FOB) value.
Apart from these benefits, you can always apply for a small business loan for textile business if you need financial assistance. Nowadays, non-banking financial institutions like Lendingkart Finance are offering instant business loans to the tune of ₹ 2 crores for promising small and medium businesses. As opposed to bank loans, these RBI approved small business loans are faster and easier to obtain. Salient features of these small business loans for textile businesses include,
Features of these small business loans for textile businesses
- Ticket size of ₹ 50,000 to ₹ 2 crores. Under these loans, the entrepreneur can avail a debt funding of up to INR 2 crores. This means ease of setting up business with a greater ease for budding entrepreneurs thinking of starting a small textile business, and enough support to seasoned businesses to fuel their working capital to a good extent.
- Quick turnaround time which can be as low as 3 days. With completely digital processing and assessment, the loan turnaround time has decreased considerably over the last couple of years. If all the documents and information is in order, the loan can be processed in as low as 3 days!
- Online application, approval, and tracking. The process is completely digital, every step right from filling the application form, providing supporting information, lenders’ assessment, approval/rejection, application tracking, and funds disbursement. This coupled with faster processing, has made it really convenient for the applicants to apply for a loan online!
- Customized interest rates to match your credit profile. Your credit profile indicates the risk associated with lending you the money. For entrepreneurs and businesses with a solid credit profile and repayment history, the chances of loan approval increases. And it becomes easier for such businesses to secure better interest rates and lending terms.
- Flexible repayments through monthly or bi-weekly installments. One of the best features of such loans is the convenience of flexible repayments. Entrepreneurs can design the repayment schedule in such a way that there is a sync between the repayment schedule and revenue realization. Also, with flexible repayment, the businesses can utilize the capital more efficiently while not being under the burden of repayment.
- Repayment period of 1 to 24 months. Textile manufacturing can be capital intensive. These short term loans help cater to the working capital requirement of the business while not having a longer repayment commitment.
- Processing fee of 2 to 5 per cent with no other charges. Hidden charges end up making the final disbursed amount lower than the loan amount that was originally applied for. This sometimes catches the entrepreneurs off guard, and may derail their business plans with the loan amount. Lower processing fee and no other hidden charges maintain transparency, and build trust between the applicant and the lenders!
- Prepayment charges are applicable as per the lender’s policy on business loan. It is essential to understand the charges associated with the loan to ensure there is no friction or surprises later, if you’re planning to make a prepayment of the outstanding, there is usually a charge concerned with the same. The applicant must check for the relevant charges in the loan documents or can reach out to the lender to know the same.
- Loan renewal for the same amount upon full repayment. This is a boon for capital intensive businesses which often have a repeated requirement for funding injection to operate efficiently. This facility enables the businesses to avail loans on a repeated basis once the repayment for the existing loan is done.
As you can see, the ticket size and repayment window make these loans ideal for various business activities such as equipment purchase, restocking inventory, working capital management and business expansion. You can use a Lendingkart small business loan to perform any or all of the critical business tasks which require immediate financial attention. The loan application process is quite straightforward and takes only 15 minutes to complete. Simply log in at www.lendingkart.com or download the Lendingkart Finance app on your Android device to get started.
FAQs:
1. What are the eligibility criteria for a textile business loan?
Eligibility criteria for a textile business loan typically include a strong business plan, a favorable credit history, evidence of consistent revenue, and industry-specific expertise. Lenders may also assess the business’s financial stability and ability to repay the loan. Ensure that the information presented and documents submitted to the lenders for assessment are truthful and can be backed by the proof. Failing to present truthful documents can lead to rejection and negative impact on the credit score. One must refrain from lying and holding back information to increase the probability of loan approval.
2. What are the Repayment terms for textile business loans?
Repayment terms for textile business loans or loans for textile manufacturers vary but commonly range from 1 to 5 years. Payments are often structured as monthly or quarterly installments, with interest rates and terms determined based on the lender’s policies and the borrower’s financial profile. With lendingKart the applicant has the convenience of flexible repayment tenure, which can be leveraged to maximize the use of the loan amount, and the repayment can be done with utmost convenience.
3. What are the common purposes for which textile businesses seek financing?
Textile businesses financing seek financing to fund equipment purchases, manage working capital, expand production capacities, optimize inventory management, and enhance infrastructure. These investments are essential for growth, innovation, and maintaining a competitive edge in the industry.
4. What types of loans are available for textile businesses?
Textile businesses can access various loan options, including term loans for long-term capital needs, working capital loans to support day-to-day operations, equipment financing for machinery and technology upgrades, and trade finance solutions for international transactions and expansion. These loans can prove to be really helpful to fund operations of the business as well as help the expansionary activities to ensure viability and growth of the business.
5. Are there any collateral requirements for obtaining a textile business loan?
Collateral requirements for textile business loans can vary but often include business assets, personal guarantees, or the specific textile equipment being financed. Lenders assess collateral to mitigate risk and secure the loan. Collateral serves as a security for the lenders, in case of a default, the lenders can legally sell the collateral to secure the outstanding dues from the borrower.
