No matter their size or industry, every business requires a regular influx of money to deal with their working capital needs and maintain cash flows. Companies that cannot arrange money frequently find it very difficult to survive in this competitive business world. The need for this working capital is to ensure smooth operations and improve profitability primarily. Funds are required to meet different requirements. Some of which include:
- Hiring/training/paying employees
- Purchasing new machines/equipment
- Purchase supplies
- Expansion of workspace or business as a whole
Businesses have different options to meet these requirements for funds. There are different types of business loans available to choose from. Various financial institutions like NBFCs offer business loans at attractive interest rates. Also, documents required for a business loan aren’t as difficult to arrange. The application and disbursal processes are simple and less time-consuming.
Before moving any further, let us first discuss what business loans are.
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What is a Business Loan?
In simple terms, business loans are an unsecured credit line designed by financial institutions like NBFCs and offered to businesses looking for a solution for their short-term financial problems. These loans are great at helping companies cover their daily expenses. Most of these loans are characterised by the limited capital requirement associated with them. This is the reason they are put in the installation or small business loan category.
These loans help businesses to put a lid on the day-to-day cash crunch. Business loans help companies maintain a balance in their cash flow, which is very important for making sure that there are no financial challenges in running a business. Cash requirements could be because of a rise in demand in the peak season or a decline in need in the offseason. Short-term business loans are prevalent amongst small service providers, manufacturers, wholesalers, traders, and retailers.
Why should you avail of business loans?
One of the primary reasons businesses move towards business loans is their need to meet immediate requirements. Here are some of the benefits of business loans:
One of the significant benefits of getting a small/instant business loan is to meet the immediate requirement of your business entity. Some of the financial benefits of availing of business loans are:
- Simple application process: One of the most significant benefits of availing of a business loan is how easy they apply for. Anyone with even the slightest knowledge of how business loans work can go ahead and do it. What’s more, documents required for business loans provided by NBFCs are not as difficult to arrange as documents are necessary for traditional loans. Also, there is no complexity in the application process. Loan disbursal is also done in a lesser time than what you associate with conventional loans.
- Flexible: Most business loans are very flexible. There are many options available in front of businesses to choose from. They can choose a loan that best fits their requirement. Some loans differ in repayment duration, interest rates, loan amount, and eligibility, amongst other things.
- Reasonable interest rates: Most NBFCs offer business loans at quite competitive interest rates. Also, it is essential to know that these rates depend on a lot of different factors. Some of these include the creditworthiness of the borrower, collateral, and duration of the loan. Apart from affordable interest rates, small business loans are also beneficial because they put minimal penalty or none at all on prepayment. Also, their processing fees are significantly less.
- Easy repayment: There are many repayment options available to suit different repayment capacities of businesses. Businesses can look at the pros and cons of varying repayment options before choosing anyone out of them. The payment can be made in instalments, which reduces the financial burden that comes from having to pay an entire amount at once. Businesses can choose the duration of EMIs based on their repayment capacity.
Business loans can help business owners in more ways than they initially envisage. What’s important is that they find themselves the right financial institution and loan to enjoy the benefits.
