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By Rishi Mehra
To ensure your business stays ahead of the curve, it is very important to invest in technology. Being up- to-date with technology means you can get the best out of your business in an efficient and optimal manner. However, technology does not come cheap and more often than not; it does call for substantial investment.
Take for example, a move to install computers in your business or even upgrading existing ones. This will mean the cost of buying the hardware and also associated cost of getting network connection to go online. While the cost of computers and accessories has come down, you would still need to make a sizeable investment to buy it. If you decide to have your own servers, this will cost you even more.
The hardware alone would not be of much help in this case and you would need the software to go along with this. The good thing is that most software products are now available on a subscription format, which means the cost upfront tends to be lower. Business would also need specialized software like ERP, CRM, etc. and this does tend to add to the cost. If you decide to hire someone to take care of your IT needs, you would have another cost to cover.
Beyond that, you may need to pay in the form of advisory services to understand your IT needs. There are a plethora of technology that is available for businesses and sometimes it may help to get external help in determining what works for you. Such services will include chalking your entire IT plans, defining the strategy and ensuring security of your network.
Why a bank loan makes sense:
It is obvious that technology does not come cheap and you would need money for it. If you have sufficient cash at your disposal, it you should consider using your own resources, but in the current volatile environment, it may not be wise to make a large capital expenditure. Bank loan in this case is a convenient alternative. It is relatively less cumbersome and funds can be obtained relatively quickly.
The greatest benefit is that you can have access to funds without diluting ownership of the business. Getting technology in your business through an equity stake sale will not make much sense and it is better to go for debt that can be repaid on a monthly basis. Loan for technology upgrade can be negotiated on a flexible repayment term and a favorable rate of interest. There are hardly any strings attached to a bank loan as long as repayments happen on time. Also, it helps that you know the terms of repayment and can plan your finances accordingly. This ensures peace of mind and at the same time ensuring that you do not have to dip into your working capital to adopt new-age technology.
Government help:
Not known to many, but the Government of India has a robust plan to help small businesses adopt technology. The Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation is a great scheme that incentivizes technology upgradation that a small business can undertake across a plethora of products.
According to the Government of India, “Technology up-gradation would ordinarily mean induction of state of-the-art or near state-of-the-art technology. In varying mosaic of technology obtaining in more than 7,500 products in the Indian small scale sector, technology up-gradation would mean a significant step up from present technology level to a substantially higher one involving improved productivity, and/or improvement in quality of products and/or improved environmental conditions including work environment for the unit.”
While the scheme has been around for some time, awareness is low and the benefits are not known to many. The scheme, “aims at facilitating technology up-gradation by providing 15% up-front capital subsidy to SSI units, including tiny, khadi, village and coir industrial units, on institutional finance availed of by them for induction of well established and improved technologies in the specified sub-sectors/products approved under the scheme.”
Ceiling on loans under the scheme is at Rs.1 crore and admissible capital subsidy is calculated with reference to purchase price of plant and machinery, instead of term loan disbursed to beneficiary unit.
Being abreast with advancement in technology is the key to building a sustainable business in a globalized world. While there may be other options that a business owner can look at, loans are generally the most logical method to raise funds. With government support in terms of schemes, small businesses should in fact, consider technology as the underpinning for their operation.
(The writer is the CEO, Wishfin.com)
To ensure your business stays ahead of the curve, it is very important to invest in technology. Being up- to-date with technology means you can get the best out of your business in an efficient and optimal manner. However, technology does not come cheap and more often than not; it does call for substantial investment.
Take for example, a move to install computers in your business or even upgrading existing ones. This will mean the cost of buying the hardware and also associated cost of getting network connection to go online. While the cost of computers and accessories has come down, you would still need to make a sizeable investment to buy it. If you decide to have your own servers, this will cost you even more.
The hardware alone would not be of much help in this case and you would need the software to go along with this. The good thing is that most software products are now available on a subscription format, which means the cost upfront tends to be lower. Business would also need specialized software like ERP, CRM, etc. and this does tend to add to the cost. If you decide to hire someone to take care of your IT needs, you would have another cost to cover.
Beyond that, you may need to pay in the form of advisory services to understand your IT needs. There are a plethora of technology that is available for businesses and sometimes it may help to get external help in determining what works for you. Such services will include chalking your entire IT plans, defining the strategy and ensuring security of your network.
Why a bank loan makes sense:
It is obvious that technology does not come cheap and you would need money for it. If you have sufficient cash at your disposal, it you should consider using your own resources, but in the current volatile environment, it may not be wise to make a large capital expenditure. Bank loan in this case is a convenient alternative. It is relatively less cumbersome and funds can be obtained relatively quickly.
The greatest benefit is that you can have access to funds without diluting ownership of the business. Getting technology in your business through an equity stake sale will not make much sense and it is better to go for debt that can be repaid on a monthly basis. Loan for technology upgrade can be negotiated on a flexible repayment term and a favorable rate of interest. There are hardly any strings attached to a bank loan as long as repayments happen on time. Also, it helps that you know the terms of repayment and can plan your finances accordingly. This ensures peace of mind and at the same time ensuring that you do not have to dip into your working capital to adopt new-age technology.
Government help:
Not known to many, but the Government of India has a robust plan to help small businesses adopt technology. The Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation is a great scheme that incentivizes technology upgradation that a small business can undertake across a plethora of products.
According to the Government of India, “Technology up-gradation would ordinarily mean induction of state of-the-art or near state-of-the-art technology. In varying mosaic of technology obtaining in more than 7,500 products in the Indian small scale sector, technology up-gradation would mean a significant step up from present technology level to a substantially higher one involving improved productivity, and/or improvement in quality of products and/or improved environmental conditions including work environment for the unit.”
While the scheme has been around for some time, awareness is low and the benefits are not known to many. The scheme, “aims at facilitating technology up-gradation by providing 15% up-front capital subsidy to SSI units, including tiny, khadi, village and coir industrial units, on institutional finance availed of by them for induction of well established and improved technologies in the specified sub-sectors/products approved under the scheme.”
Ceiling on loans under the scheme is at Rs.1 crore and admissible capital subsidy is calculated with reference to purchase price of plant and machinery, instead of term loan disbursed to beneficiary unit.
Being abreast with advancement in technology is the key to building a sustainable business in a globalized world. While there may be other options that a business owner can look at, loans are generally the most logical method to raise funds. With government support in terms of schemes, small businesses should in fact, consider technology as the underpinning for their operation.
(The writer is the CEO, Wishfin.com)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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