Funds act as fuel for a business, whether it be a small business, a startup or a big enterprise, fundings are equally important for each one of them.
Whatever be the reasons for borrowing, not all business loans are made equal. Some of them have stringent credit history and documentation requirements while some have high-interest rates. Some are government-guaranteed schemes or long-term loans that are granted at lower rates without collateral. There are multiple channels for small-business loans that provide business credits, and hence the choices can get confusing. However, among all the options some business requirements are urgent and require quick funding. In this blog, we will be talking about some of those options which provide fast business funding for your business.
Before coming to those funding options lets know what should you look for when applying for a business loan?
To minimize the risk and ensure you get a positive return from your borrowing, you can do an informal small-business loan performance analysis using an EMI calculator on a loan site such as Finance buddha.
This will help you know how much it will cost you by providing you the total borrowing cost. It will tell you your monthly estimated EMI according to which you can adjust your loan amount. Doing this will forecast how the loan will financially impact your business before you commit to taking the loan.
Peer-to-Peer (P2P) Loans
- Simplified application process.
- High loan amount approval.
- Flexible Repayment period ( varies from platform to platform).
- The interest rate varies depending on your credit score and borrower’s profile.
- Minimal Eligibility requirement.
Peer-to-peer lending is a rapidly growing platform, largely because it cuts out the middleman.
However, these loans tend to also have higher interest rates and are more favorable for those who need urgent funding.
The peer-to-peer lending marketplace works through online platforms, which connect borrowers and lenders.
Each P2P loan is often divided among several investors, spreading the risk. For instance, somebody who needs to borrow money goes to a P2P company.
The upswing of P2P platforms is that the process is simple as compared to the process of going to a bank.
It’s a very streamlined process which is done entirely online.
- This provides funding to startups and other small businesses.
- Funders are provided at comparatively lower interest rates.
- The average loan term ranges from 2 years to 5 years.
If you own a small business and you are looking for funds to support your business, then a microloan can do it well. The loan comes at a low interest and for short-term which makes it ideal for a start-up and small businesses.
Microloans are nonprofit sharing funding options that work the same as a conventional business loan.
You are free to use the funds available as per your requirements but your lenders can ask you for your business plan to ensure loan repayment.
Business Line of Credit
- Quick funding available as it takes less time to get approved.
- Works like a credit card hence the name business line of credit.
- Better than a credit card as the interest rate charged is comparatively lower than credit cards.
- One can apply for it online
- It can be used the same as credit cards and one can borrow as per their requirement.
- You get an upper limit to withdraw from.
- Interest is only charged on the money you use.
- No restriction on the end use of money.
- You can purchase inventory or equipment, invest in marketing or manage fluctuations from the money borrowed.
Business lines of credit operate like a credit card and you can repeatedly use your line of credit as per your requirement & convenience without reapplying for a new loan each time. The upper limit allotted to you generally depends on your profile, business scale and repayment capacity.
You can borrow up to that amount and repay it, as long as you don’t go over your maximum and make the minimum payments. Same as credit cards, you’re charged a monthly interest on the amount you use.
The line of credit is flexible in terms of what you can spend it on.
The documentation you’ll need is your personal and business tax returns, bank account statement, business profit-and-loss statements and a balance sheet and business license documents.