Small, medium or big businesses need liquid funds to cover everyday expenses. Sometimes, entrepreneurs need funds to innovate or upgrade their current business operations. Business Loans are a great way to take care of these needs.
A Business Loan can be taken to achieve different goals based on your needs. Whether you need the funds to grow your company or infuse working capital, your needs will determine the type of Business Loan you need.
Financial institutions offer a variety of Business Loans to cater to different business scenarios. Let’s examine seven distinct categories of available business finance.
- Term Loan (short & long-term loan)
- Working Capital Loan
- Small Business Loan
- Loan Against Property
- Invoice Financing
- Overdraft Facility
- Business Credit Card
Term Loan
Term loans are one of the most popular business loans in India. A term loan must be paid back in recurring instalments over a predetermined period. There are two types of term loans: short-term and long-term loans. Short-term loans have a tenure of 1 year, whereas long-term loans have a term of up to 10 years.
The purpose of use need not be stated when applying for such a loan. The amount of the loan is determined by the business’s credit history. Capital expenditure financing is considered to be one of the most effective applications for a term loan.
Working Capital Loan
Working Capital Loans are used by businesses to cover their day-to-day expenses. It can be used to manage salaries, inventory, raw materials, equipment and machinery. When an unexpected cash flow problem occurs, this loan is helpful. When in doubt, talk to the Clix Capital team of loan experts to understand the Business Loan process better.
Working Capital Loans often have a short repayment period of up to 12 months. Since the borrower is not required to provide any security or collateral, they are classified as collateral-free loans.
Small Business Loan
Small Business Loans are ideal for entrepreneurs planning to expand their small businesses. Loan providers consider the company’s credit rating as well as the borrower’s personal credit rating to determine loan eligibility for a Business Loan. You can also use business loan eligibility calculator to check your eligibility. The company’s current turnover data and other financials determine the loan size, Business Loan tenure, and interest rate.
The applicant must have an operational business before requesting a Business Loan. The applicant must provide documentation of the business’s existence and registration at the time of the application.
Loan Against Property
A Loan against Property is for businesses that can mortgage collateral. A business can obtain a loan of more than Rs. 50 lakhs by using real estate as collateral. A Loan against Property has a business repayment loan tenure between 10 and 20 years. For this kind of Business Loan, mortgaging real estate is a must to receive finances.
The sort of asset that the borrower can use as security is not limited. NBFCs usually offer loans of up to 70% of the property’s value. However, the property pledged as security must be clear of all pending legal matters.
Invoice Financing
Small firms might benefit from invoice finance. It is often referred to as invoice discounting or factoring. When there is a delay between issuing invoices and receiving payments, a Business Loan aids in covering everyday financial needs. The loan provider gives the money in exchange for the amount requested in the invoice. Up to 80% of the invoice amount may be borrowed from the financial institution. After receiving the payment, the business repays the loan amount following the agreed-upon interest rate and duration.
Overdraft Facility
Only when a company has fixed deposits with a financial institution, it is eligible for a business overdraft. The loan provider considers the business’s repayment history, and cash flow to fix the overdraft limit. With this kind of loan, the borrower can take out the necessary amount and only pay interest on the amount used.
Business Credit Card
A company credit card is fantastic for meeting urgent needs. It enables companies to access funds while they are in a critical situation. Business credit card customers receive many benefits, like credit points, cashback and insurance coverage. Unfortunately, this credit financing has substantially higher interest rates. Consequently, using a corporate credit card has to be the last resort in a cash crunch.
Final Thoughts
Now that you have a good understanding of the different kinds of Business Loans offered by lending institutions in India. You can select the loan type that suits you the best from these flexible Business Loans. Focus on getting easy EMIs at low and appealing interest rates.
You can choose the funding option that is most appropriate for your venture, now that you are aware of the various types of Business Loans available in India. Clix Capital provides an easy-to-follow Business Loan process but selecting a Business Loan depends on your company’s needs. Talk to the Clix Capital experts today to learn more about how to apply for a Business Loan.
