Entrepreneurship has become the talk of the era and is rising at a high pace. Young entrepreneurs are finding ways to get funds for business financing but end up getting nothing in their hands. Pitching in front of big companies isn’t doing any good either, and it is high time to get a decent financing option.
But what if there is an option that you should probably consider for financing your business? And there is an option, and the answer is business loans. A business loan can help you finance your business venture, buy raw materials, invest in equipment, and tackle marketing and advertising. It can help you take your business to the next level.
This article is all about the business loan system. You will come across business loans, why they are taken, and how they can be financially beneficial.
Business Loans: Meaning and Significance
Like every other type of financial assistance, a business loan is a type of loan that helps you finance your business and meet all the expenses. It allows you to buy raw materials, source new equipment, invest in your market outlets, and meet your consumers’ demands. In a business loan, you borrow money from a lender to facilitate your business, and in return, the lender charges you a rate of interest for a set period.
You can repay the borrowed money in the form of instalments within the tenure. A business loan is an unsecured form of credit that doesn’t require you to show any collateral or deposit any security funds at the time of approval. You can just get approved without any collateral and then start investing it right away to fulfill your business dream.
Business Loan: Benefits of Opting for It
There are numerous reasons why you should give business loans a shot:
- Lower rate of interest:
The rate of interest on most business loans is on the lower side, and this will bother you less while repaying your loan. Banks charge a lower rate of interest so that the maximum amount of your loan money is directed towards growing your business and a minimum of it goes into repaying the instalments.
The percentage varies from bank to bank from about 15% to 20% per annum. While some banks also provide a 9.5% per annum of interest rate to some businesses. However, some lenders like Lending kart Finance and Indifi Finance even come down to 1% to 2% per annum.
- Quick approval:
The approval period for an entrepreneurial business loan is somewhere between one and two days. If your credentials, like your credit history and credit score, are decent and your business pitch is strong, you can even go down on the approval period.
- Loan amount up to 50 lakhs:
The loan amount can be as high as 50 lakh rupees for your business, which is a huge amount if your business is at its initial stage. This amount will be a real help if you need a lump sum to invest in your venture. Some banks even go over that and may allow up to 1 crore rupees, but that will depend on the scope of your business growth, your credentials, negotiations, etc.
- Collateral is not required:
You don’t have to give collateral or some security deposits to use it as a guarantee to repay your business loan. It will be of real help to you if you have started from scratch and you lack a property to show as collateral.
- Convenient instalments:
The instalments are likely to be easily payable, considering that the focus would be on growing your business. The monthly or quarterly payments will be lower so that you can manage your expenses wisely and repay your debt at your leisure.
Why Are Business Loans Financially Beneficial?
- Working capital management:
Business loans help your business to maintain a cycle of steady cash flow which helps your business to keep going on. This is called working capital management and is a huge reason why you should prefer business financing through a business loan.
- Regaining control over your business:
In case outside investors invest in your business and take a percentage of equity and start controlling it, a business loan will help you to prevent this. Business loans enable you to get over your fund crisis and help you regain control over your business again.
- Building business credibility:
All businesses run on the power of credibility, and building credibility is not a big deal. After having a business loan, you must ensure that you repay your instalments on time, and you will keep building your credit score and bettering your credit history, which will help you out with it.
- Exemptions from tax:
Though the exemption rate from tax in a business loan is not as high as other loans like housing loans and education loans, still there is a decent tax cut. You don’t need to pay tax on the profit you make from the borrowed money.
- Advertising and marketing:
Business loans help you advertise your products and market them to the public so that your sales increase and you land a good amount of profit.
For young entrepreneurs coming up with innovative business ideas, funds could be a real deciding factor. A business loan can provide you with financial assistance and help you reach your business dreams.
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