4 types of loans that you can get as a business owner
Irrespective of the nature of your business, you will need a steady flow of funds to meet your day-to-day expenses and to execute future business plans. After all, it is only with an infusion of funds that you can propel your business towards growth. So, it is important that you understand the various forms of finance available to you.
Take a look at the 4 main types of business loans:
1. Flexi Business Loan
· Based on your financial needs you can access a high amount of up to 30 lakh with this loan. The main advantage of flexi business loan is that you can withdraw money in instalments from the total loan amount, as and when the need arises. Since, this loan is defined by its flexibility, it can serve your small business in many ways.
· Let’s assume that you are in the business of manufacturing and exporting scarves, and your requirement for funds depends on the export orders, which peak during winter. You take a Flexi Business Loan of 28 lakh in November and use it to purchase a screen-printing machine costing 7 lakh to meet a special overseas order. You can withdraw this amount from the approved loan limit, and pay interest only on this sum. Then, two months later, in January, you construct a packing station to reduce packing time. To fund this, you withdraw another 50,000. Now, you will pay interest on 7.5 lakh. In this manner, you can keep making withdrawals against the total amount.
· This loan is flexible as it allows you to borrow, repay and re-avail funds as many times as you wish to. Therefore, it is ideal for catering to unpredictable needs. Moreover, you can choose to pay your interest component as EMIs, and repay the principal at the end of the tenor, once you receive payment for the overseas order. This will keep your monthly outflow to a minimum.
2. Working Capital Loan
· There may be times when you need funds to finance your working capital needs. Availing this loan will help you do just this.
· A working capital loan is a collateral-free loan that comes with simple eligibility features and quick disbursal. Apart from the easy procedure, you get access to funds to support all your everyday business needs, from paying utility bills to inventory costs.
· As the manufacturer and exporter of scarves, you will have to participate in export-import exhibitions to expand your business and get access to more clients. You know that your monthly working capital will help you pay for a stall at the exhibition, based on last year’s costs. But, due to a change in the fee structure, you find that you have insufficient funds to participate and you don’t want to break your savings to secure your participation. You can quickly arrange for funds through a working capital loan to take care of the situation. In this case, taking a working capital loan will give you the funds you need to make the most of this opportunity.
3. Machinery Loan
· You can buy, upgrade, lease, repair, or install machinery as per your business needs using a machinery loan. You can also use it to conduct training sessions to help your employees use the machinery more effectively.
· A machinery loan does not require you to pledge any asset as security. Additionally, it gives you access to funds through a flexi loan facility, if need be. This makes it easier for you to plan your equipment purchase.
· As a scarf manufacturer, you can use this loan to purchase expensive embroidery machines and dyeing machines. You can also get auxiliary equipment like industrial irons and commercial washing machines. This loan can help in any sort of equipment and machinery purchase irrespective of whether you need it for your day-to-day functions, or to achieve a specialised task.
4. Business Term Loan
· Packed with benefits like quick processing and fast disbursal, a business term loan comes with simple eligibility criteria, which allows you to borrow a high amount of up to 30 lakh while paying a nominal interest. While term loans can be secured or unsecured, a business loan is usually unsecured.
· This means that you do not have to pledge any personal or business asset as a security and you can use the loan amount as you please.
· Yourscarf-manufacturing firm could use a business term loan to pay off the logistics vendors who take care of your delivery for a quarter. You can also use this loan to buy company vehicles for your and your employees’ use. Term loans are especially handy when you know the cost of item that you are purchasing, or the price of the service that you are availing.
Now that you understand the various business loans available to you, you can match your needs with the perfect financial offering.
Apply for a Flexi Business Loan from Bajaj Finserv and avail benefits like:
· High loan amounts up to 30 lakh
· Affordable interest rates
· Money in bank in 24 hours
· Minimal documentation
· Easy repayment facility
To know more, click here.