Starting a new business is an enormous task but sustaining in the market is even more difficult. Ensuring the flow of the capital required for the functioning of the business can take a lot out of you. A commercial loan for business is a great enabler for business owners to fund their capital requirements arising because of a variety of reasons. Whether you are planning to buy new machinery, looking for funds to cover the unexpected operation costs, or planning to expand your business. Whatever be the need, a commercial loan can aid you in taking care of the expenditure. In this blog, we will discuss how to get a commercial loan to fulfil the business cash flow requirements and the benefits of getting a commercial loan. But first, let us understand what a commercial loan is and how it works.
What is a Commercial Loan?
In simple words, a commercial loan is a loan given to a business by a lender. A lender can be a bank or a Non-Banking Financial Corporation (NBFC) in India. A business owner can be anyone looking to grow their existing business or planning to start a new business. A commercial loan is given to a business entity and not an individual. The entities that are eligible for a commercial loan are a Limited Liability Partnership, Sole Proprietorship, Public or Private Limited Company.
Benefits of a Commercial Loan
There are several benefits of availing commercial loan options to fulfil your business capital requirements. Here are some of the key benefits
- Grow your business – The next best thing to starting your own business is when you decide to expand it. A commercial loan can aid small and medium business owners to take this step without worrying about the fund requirements. Expanding your business requires capital apart from the working capital required for the existing setup. A commercial loan supports those small and medium business owners with limited capital to grow and reach out to their audience while ensuring the smooth functioning of day-to-day operations.
- Buy new machinery – A commercial loan can be availed for a variety of purposes. If you are in a manufacturing business you might need to buy a new piece of machinery or to upgrade the old one to maintain smooth operations and to increase production. An equipment financing option as a commercial loan can help you in getting the right set of machinery to help you maintain the smooth operations of your business.
- Manage inventory – Small and medium businesses usually work on a need basis but sometimes when your business gets a big order it is best to have raw material readily available to meet the deadlines. A commercial loan can help you get the funds required to buy essential inventory.
- Increase working capital – Working capital is the amount required to take care of the day-to-day fund requirement of the business. A commercial loan helps you maintain the capital required for daily activities and to meet unexpected expenditures.
How to Get a Commercial Loan
A commercial loan can be easily availed online through web portals of banks or NBFCs. Any business entity with a good turnover is eligible for a commercial loan. The definition of good turnover can vary based on the lender. Applying for a loan has become much simpler these days; the majority of financial institutions require very little paperwork. All you have to do is visit the lender’s office or fill out an application form online. Based on your application and eligibility, most lenders approve loans within a few days.
The commercial loan interest rates depend upon the creditworthiness of the business, cash flow, bank or NBFC, turnover of the company, etc. The commercial loan interest rates tend to vary based on the risk assessment done by the lender.
The number of entrepreneurs in India has risen over the past few years. The entrepreneurial spirit is on the rise, and so is the number of new companies being registered around the country. One thing that is vital for any business to survive and flourish is the capital required for running the business. A commercial loan gives easy access to capital to meet your fund requirements. Whether you are just starting your business or planning to grow an existing one, a commercial loan can help you meet your capital requirements.