All small businesses require funds every time to ensure they have enough liquid cash. They need working capital to make sure their business operations are smooth, and they make enough profits. Whether the requirement is to purchase new equipment, hire and train staff, expand the office to a larger premise, or procure raw material or more inventory, there is a need for cash to finance all the requirements. Not just this, there are other miscellaneous requirements as well that need investment.
Initially, a business owner starts his business through his savings or by borrowing from family or relatives. However, as the business grows, his savings dry up, but the business stills need more money to continue operations. There may also be the case where the business is generating enough revenue but does not have spare funds to finance new machinery or encash on a new business opportunity.
To meet these financial requirements, a business owner can avail of business loans. Several lenders operate in the market that offers small business loans, such as NBFCs (Non-Banking Financial Corporations), government institutions, traditional banks, and crowd-funding.
Let’s now take a look at how business loans can be financially beneficial for your business:
Manage Working Capital Efficiently
Business loans can be extremely beneficial to meet working capital requirements. Besides, it can also be used to expand the business. Working capital helps in maintaining the business cash-flow where there are not enough funds or during the difficult times. Notably, working capital is required to meet the everyday expenses of the business, like salary and wages, electricity bills, rent, etc. It supports daily operations. If there is no working capital, it can harm the day-to-day business operations.
So, a business loan can be availed to increase working capital in order to keep the business running in a difficult time. Business loans strengthen the financial stability of the business, as well.
You can apply for different types of business loans as per your requirements. If you need to buy new machinery or upgrade it, then you can avail of a machinery loan. There are working capital loans available as well. If you want a loan for the short-term, then there are short-term loans available. Same way, there are long-term loans available as well. In general, short-term loans extend up to two years, and long-term loans extend up to 15-20 years.
So, you have the flexibility to choose the loan type as per your requirement. Also, as per your estimated calculations, you can choose the loan tenure that suits you the best.
Affordable Interest Rate
Non-banking financial companies offer loans for businesses at very competitive interest rates. Generally, these rates depend on a number of factors, such as loan tenure, collateral offered, and your creditworthiness.
If you have a CIBIL score and meet all the lender’s eligibility criteria, then you are less risky for the lender to lend you his money. With you being less risky for him, the lender is more likely to offer you loans at low-interest rates.
In addition, these NBFCs charge a minimal processing fee. And there is generally no penalty for the prepayment of the loan. Besides, they offer an unsecured business loan, where there is no need to hypothecate security. Thus, by availing an NBFC business loan, you can save a lot on the interest cost, processing fee, and others.
Flexible Repayment Options
Business loans in India come with flexible repayment options. This ensures that you are never under a burden to repay the loan. You can choose the repayment plan as per your business finances. Even you can choose the repayment plan as per your pocket- increase or decrease the number of EMIs. This gives you easy options to pay EMIs. You can choose for auto-debit facility wherein the EMI would be deducted from your account automatically. Also, you can select for EFT – Electronic Funds Transfer from your bank account.
Collateral-free Business Loans
Alternative lending options, such as NBFCs and online lenders, offer unsecured business loans. They are unsecured in nature, which means there is no need to provide security to avail of a loan. These loans are the best for small business owners as they are easy to avail, and they can sustain their business venture easily.
Build Greater Loan Limit
Short-term business loans are the best opportunity to enhance business credibility and CIBIL score. If you repay all the EMIs on time, it will boost your business credibility and make you eligible for a higher loan amount. Further, it enhances your chance of large-scale financing if the need ever arises.
Hence, it can be said that the business loan offers various benefits for your business. It is just that you need to evaluate all your requirements and choose the right loan lender and business loan for you. Choosing the right loan product is very important; otherwise, you will end up taking the wrong loan and getting caught in a debt trap.