As per a recent survey, the number of Small and Medium Enterprises in India is estimated to be around 42.5 million which comprise an astounding 95% of total active industrial units in India.
Data sourced from this survey also indicates that SMEs of our country accounts for at least 16% of credits availed from financial institutions which mostly comprise of business loans.
Business loans are a form of financial credit specifically designed to deal with the financial demands of a business.
As a business owner, you can avail a substantial business loan from several financial institutions in India to deal with the monetary requirements of your growing business at affordable rates of interest.
Why are business loans an integral part of a successful business?
If you do not possess adequate funds while your business is ready for a commercial leap, you can consider the following reasons for when to apply for a small business loan –
- Relocation of business
In order to let to your business grow to its maximum potential, you may require to shift your company to a new location with a larger workspace.
However, this relocation procedure comes at a huge cost, but it can be managed with the help of a term business loan which offers a substantial loan amount to meet such expenses.
- Maintain short term liquidity
As a business owner, you may require funds to generate constant cash flow. In such cases, availing a working capital loan helps to mitigate the financial troubles created from such issues.
These types of loans are generally unsecured and offer a considerable loan amount of up to Rs.30 lakh at affordable rates of interest and flexible repayment tenors. Obtaining a substantial working capital not only helps your business to stay agile but also to sustain its market value.
- Business expansion
The financial expenses of a business are mostly delegated towards the inventory and distribution sector.
Business owners may require additional funds to expand their inventory space so that they could replenish their storage facilities with an enhanced inventory management system.
An improved inventory of an enterprise also requires the distribution sector to be efficient as well.
Business owners can avail small business loans to incorporate the above-mentioned management systems, which would help to streamline the supply chain and thereby increase the generated cash flow.
An efficient supply chain helps to ensure that your business never runs out of working capital.
- Purchase of equipment
As per the type of business you own, you will require a particular type of machinery to perform the tasks. Financial institutions across India offer machinery loans at lower interest rates compared to the various other unsecured credits.
These loans are primarily secured and the loan amount depends on the market value of the purchased equipment or vehicle. However, since the purchased equipment is pledged as collateral, you have a risk of losing your asset in case you default.
Such loans usually have easier business loan eligibility criteria over its unsecured counterparts. You can even consider availing unsecured machinery loans as well offered only by select lenders.
- Building business credit for the future
In several cases, SMEs in India are not granted substantial business loan amounts if the owner or the organisation is unable to provide a strong credit information report.
In such cases, financial experts advise to opt for small business loans and henceforth make regular loan EMI payments to build improved business credit for the future. This also helps in building trust with financers as well.
The most important eligibility criteria, along with your credit history and identity verification details, are the specific business loan documents such as the trade license certificate, audit reports, latest ITR portfolios, etc.
Reputed NBFC Bajaj Finserv offers small business loans with a fast disbursal rate. This NBFC also brings forth pre-approved offers that make availing such loans hassle-free.
So, as per the above discussion, business loans are definitely an integral part of the success of a business as they provide enterprises with the credit opportunity to meet their financial needs.