5 Types of Business Loans to Opt for in India

One of the most common hurdles you'll ever face as a business owner is getting adequate funding for your company. One of the biggest financial myths, especially about small businesses, is that there aren't enough funds available. That's not true. Did you know that the total start-up funding in India touched $11.5 Bn? That too amid a pandemic which resulted in rising hysteria, unemployment, and business loss. It might have been difficult for a start-up to get a bank loan a few years ago. Still, there are several options that you can avail of in 2021, including online business loans. Say goodbye to traditional business loan companies and embrace alternative players like FinTech platforms that offer quicker and easier approvals. Whether it's for operating expenses (e.g. salaries, overheads, etc.) or purchasing new machinery, you can get business loans and make it happen. Here are five types of business loans that you can opt for:

1. Loans for Start-ups

If you're a budding entrepreneur with a great idea which you can't wait to turn into a thriving business, a start-up loan may be the thing for you. It offers respite from the intensive loan application of a typical online business loan. Since you're just starting, your company won't have been in operation for more than two years. You either haven't made any revenues or are just about to. In this scenario, lenders would assess your eligibility based on your personal credit score and your start-up's forecasted financials. Your company needs to be registered and have completed at least six months of operations. If you have good repayment behaviour and your business shows growth potential, your chances of getting a loan increase.

Related Blog - 5 Ways a Business Loan Helps You Grow

2. Term Loan

This is one of the most common types of loans offered by business loan companies. Your lender disburses a fixed amount directly into your bank account in a lump sum. This loan is also taken for a specific purpose, the most common one being purchasing land and buildings. A term loan can be both secured and unsecured. The repayment tenure also differs based on the online business loan's nature. If it's unsecured, you usually get 1-5 years to repay the loan. If it's secured, the loan is spread among 15-20 years, depending on your lender.

3. Working Capital Loan

If you're a small and medium enterprise (SME) owner and cannot sustain sales all year round because of your business's nature, a working capital loan or capital finance loan might be just what you need. If you cannot count on stable sales, you'll need liquidity (cash in hand) to meet your business's operating costs. A working capital loan acts as a safety cushion of extra money for your business. It helps you take up large orders even if they come to you in the off-season. A lack of funds shouldn't stop you from taking advantage of promising business opportunities that could propel you towards growth. So, the next time you need a working capital loan, apply for one from a suitable business loan company.

4. Loans for Machinery

Almost all businesses require some form of equipment to operate or manufacture products and services. Upgrading to the latest machinery on time increases efficiency, and thereby productivity. And suppose your business depends on machinery to continue operations. In that case, repairing faulty/broken equipment becomes a typical expense as well. As a business owner, you're bound to have instances where you don't have money to fund sudden machinery repairs. Here is where a loan for machinery or equipment financing will come in handy. The loan is pretty straightforward – it is a typical secured online business loan, where the equipment you purchase is collateral. Based on your business's credit report, you may get an interest rate that’s lower than that of a term loan.

Related Blog - 4 Tips to Repay an Online Business Loan

5. Loan Against Property

Suppose you want to borrow a significant amount of money as an online business loan, i.e. more than ₹50 Lakhs. In that case, you can avail of a loan against property. You mortgage your property and avail of the funds, which you then use for business purposes. Depending on your lender, you can avail up to 70-80% of the property's market value. It can be residential or commercial property, but it should be free of any obstacles. Property that is a part of ongoing litigation between two parties will not be eligible for securing an online business loan.

In Conclusion

As you can see, the five points mentioned above illustrate the different options available to you regarding business financing. You needn't hold on to the myth that online business loans are hard to get anymore. If you're looking for a reliable business loan company that provides quick access to business loans, turn to KreditBee. It is India’s leading personal loan platform that offers hassle-free online business loans. To get more information on how you can avail of a business loan with us, email us at [email protected], and we will take it from there.

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