Want a Strong Business despite the Crisis?
Then you need to think of a business loan.
Know which business loan works for you and how to make the best use of it.
Choosing the Right One is Critical to a Profitable Business
The Importance of Liquidity
If you are an entrepreneur or a business owner, you know running a successful enterprise is not that easy.
Unlike a job where the individual only needs to look at a few things, you need to look at everything. From accounts to operations, from marketing to customer relationship, from employee management to paying salary on time, everything depends on you.
You cannot have off days, no weekends or holidays – even if you are lucky enough to be able to take a holiday, you spend all the time worrying about your business.
To run a successful business, you need to simplify how you run it. From automating and delegating as many as possible processes to ensuring you only focus on the really important things, you have to run a business very smartly if you want to achieve success.
Not many business owners realize that their business not only supports them and their families every day but also:
- Helps their employees pay rent and bills, take care of themselves and their families, and save for the future
- Helps run a support ecosystem that ensures everyone from the water suppliers to the cleaners, from the vendors to the hardware, software and maintenance providers are paid for their services
- Ensures the Government and authorities receive their taxes and dues and can use the money to create better infrastructure and develop the country
All of this good work, however, gets affected if the business does not run well.
A key element that funds, runs, supports and lets a business succeed is cash. And a key driver of this is the business loan.
Someone wise has said that if the concept of a business loan did not exist, the progress of man across centuries would have been impossible.
And this is truer now than most.
As rules of business change dramatically with industries and economies being connected worldwide, it becomes essential that businesses get smarter with their funding and the optimal use of debt.
The Right Business Loan Matters
Knowing the type of business loan to take can mean the difference between bankruptcy and unparalleled success.
Which bank or financial institution (NBFC) to choose, what terms to check, what interest rate to accept, and how to manage the debt are critical questions.
For example, if you run an eCommerce establishment, you can opt for a business loan that is specifically designed for your type of business and its specific needs.
Similarly, if you run a business with considerable time gap between invoicing and receipt of payment, having a line of credit or even an ongoing relationship with a bank or an NBFC for bills discounting can be quite important.
However, if your business is stuck because of a lack of cash, or you simply need some money to fund an idea you have, a generic business loan is what you may need.
Based on your needs you can choose from one of the loans below, or you may approach the bank for the right type of loan in case none of the below works for you.
Common Types of Business Loans
The most common types of business loans are:
- Line of Credit or Overdraft: One of the most common loans, here you get a specific limit up to which you can borrow and pay back, and borrow again when the need arises. You pay interest on the amount you borrow and the time for which you borrow
- Invoice Factoring or Bills Discounting: Meant usually for larger enterprises, here the banker or NBFC takes your invoice, gives you a portion of the invoice money without you having to wait for payment and collects the full amount of the invoice from your client
- Term Loan: These are for specific terms and need to be repaid within the time limit. They can be used for any business purpose
- Working Capital Loan: These loans are for you to carry on your business without waiting for the client to pay the funds after which you can buy the working capital needed to restart manufacturing
- Equipment Financing: These are a type of term loans used to pay for equipment needed to carry on operations. The equipment is hypothecated to the bank until the loan is paid off
- Professional Loans: These are extended to professionals such as doctors, lawyers, CAs, architects, etc. to grow their business
Important Factor to Consider
When you take a business loan, it is important that you manage the funds properly and follow accounting principles that allow you to derive the maximum benefit from the loan. In case you are not sure, you should talk to your CA and get some idea how the loan and its uses need to be shown in the account books.
We are here to help
At Finance Dragon, we know the criticality of a business loan.
Getting the right loan at the right time can be the difference between business success and failure.
We intend to help you with the loan and also create guide notes on how to succeed in business.
We will soon provide more details here on how we can help.
Until then if you need more information, please email [email protected] with your queries and we will try to help the best we can.
Let us look at the business loans from different banks. Click on your preferred bank name below to get to the relevant page. A small note: the banks we have not covered as yet are are not linked to their specific pages.