Any business, be it small or a bigger one always needs funds for its survival and growth. And as a business owner, you often find yourself searching for the best possible ways to fund your business requirements. These requirements vary from business to business and can range from purchasing assets and inventories and from paying staff to leasing a factory or shop space or even arranging funds for fulfilling the working capital requirements.
However, to suit these requirements there are different types of business funding available in India, and being a business owner you need to select one which suits your requirement the best.
Here are some of the business funding options available to you in 2021!!
This is one of the most common business funding options available in India and comes in both secured and unsecured forms. However, the loan works the same as that of any other loan and the amount approved through it depends on the business as well as the personal credit history of the business’s owner. A business term loan can be taken for a specific purpose which you need to tell the lender at the time of taking the loan. The loan repayment tenure is fixed and generally ranges from 1 and 5 years in case of unsecured term loans, and up to 15 years for secured business loans. For these loans, the loan amount is disbursed in a lump sum amount which needs to be repaid through monthly EMIs. There is a wide range of lenders offering business term loans, so you get lots of options to select one for you.
Business Line of Credit
A business line of credit works the same as a credit card and provides you with great flexibility. The best part about it is- you can borrow any time as per your requirements without going through the long process. Let us make it clearer- when you apply for a business line of credit you get an account opened with them, this account will have an upper limit of funds which is approved to you. Now you are free to borrow money anytime anywhere from that approved amount. The interest charged is just on the used amount and not on the total approved amount. The repayment is simple and can be done through EMIs. If you use the entire approved amount, you are eligible to use it again only when you repay the whole borrowed amount. So, this can be a great way to fulfil your business requirements.
Working Capital Loan
Working capital loans provide regular working capital funds to businesses which help them to survive in tough times. The loan comes against collateral and hence has a lower rate of interest than other business loans. However, the loan mostly works the same as a line of credit and thus the interest is charged only on the amount used and not on the entire approved amount. But, you have end-use restrictions here. The bank sets a limit for the business to use the loan amount only for specific purposes. So, before you get the loan approved you need to have a plan of action to use the borrowed amount. This also helps you to lead your business in a planned way which further results in more profit gain.
Loan against Property
Getting a loan against property for your business is one of the easiest options available. This is also ideal to opt for when you don’t have a good business credit history or a bad credit utilization ratio. This is because, in such situations, it is difficult for a lender to trust you for timely repayments. Hence providing them with collateral from which they can recover their amount gives them a surety to lend you.
However, for these loans, the approved loan amount depends on the collateral worth, and in general, it ranges from 70-80% of the property’s worth. The interest charged for this loan is comparatively lower than other business funding options/loans. However, the title to the property must be clean and free from encumbrance. The mortgaged property should also be free of litigation. The tenure of this loan ranges from 15 – 20 years.
This is also a kind of business loan which is available only to self-employed professionals such as doctors, chartered accountants, and lawyers, etc. The loan works the same as any other business loan and is given based on your profile and credit history. If your loan amount is more than 10 -15 lakhs it generally requires some kind of collateral or mortgage to get approved for this loan. Your National Savings Certificates, Government Bonds, Term Deposits, and Life Insurance Policies can also work as collateral to get approved for these loans. A professional can use this loan either to start/expand their business/venture.
Hope these business funding options will help you take your business to the next level in 2021.