Why business loan is important?

It requires funds to start, run or expand a business, and business loans are an important accessory for getting funds to boost businesses. A business needs funds for many things such as getting new equipment, increasing the workforce, expanding, etc. This loan is different from other loans and it has many benefits. 

Business loans are provided by banks as well as financing companies, government establishments, etc. From flexibility to affordable interest rates, Business loans have many features and benefits to fulfill your needs.

Types of business loans :

There are eight types of business loans available in India which serve different purposes and have their own benefits. These loans are :

• Working Capital Loan: It is a short-term loan with a time limit of almost a year or more depending on the business needs. The interest rates are higher than general loans and the amount limit is around Rs. 40lacs.

• Term Loan: It is of two types, Short term, and long-term with a time limit varying from 12 months to 5 years. The term duration is decided by the lender at the time of application of the loan, The amount limit is Rs. 2 crores for the no-collateral option. 

• Letter of Credit: It is used for import and export purposes. In this, The lender decides a credit limit for the company which is involved in international trade. The credit letter assures the supplier on the other end.

• Bill Discounting: The lender gives a discount to the borrower on the amount decided. The borrower has to contribute to increasing the revenue of the lender by paying a monthly fee.

• Overdraft Facility: The bank gives this facility to the account holder which allows the latter to withdraw the amount even though the account balance is zero. It limit solely depends on the relationship and credit history of the account holder with the bank and the interest rates charged. Flexi loans are like an overdraft limit where you can borrow amounts to an already decided limit and interest rate. 

• Point-of-sale Loan: The business owner pays a lump sump amount to the supplier to maintain the constant supply through his/her daily or future credit. The interest is higher on this loan.

• Equipment or Machinery Loan: This loan is needed for the purchase of machinery or new equipment. This loan is utilized by organizations in the manufacturing sector and it also provides tax benefits. 

• Government Schemes: There are government schemes that provide loans for supporting start-ups, MSMEs, women, and small businesses.

Business loans have many benefits, It provides you flexibility in many ways and you need these loans for the constant growth of your business. These loans are safe and many of them are also collateral free. You can build your business loan limit and it can be done by smartly using a short-term business loan in enhancing the worth of your business and loan eligibility. This will also allow you to get more amount on Flexi loans. Business loans have many benefits and you can bear the benefits of this facility if you use them smartly.