5 Types of Business Loans Every Business Owner Must Know
Sudesh Thakur had a textile business in Mumbai. He was doing sufficiently well in it. After a few years of establishing himself, he decided to expand. He was looking for finance options to fund this.
To start, grow and expand, your business requires huge capital. You may not always have the needed fund. This is where Business Loans come handy.
There are different types of business loans available at low-interest rates. Here are a few of them:
Working Capital Loan:
Every business needs capital to carry out day-to-day transactions. These include petty cash expenses, purchase of raw materials, etc. Working Capital Loans provide such business finance. There are two types of capital loans – Secured and Unsecured. You do not need any guarantee or security for availing the latter. However, you might have to pay a higher interest for it. Many Non-banking Financial Companies (NBFCs) offer such loans at attractive interest rates.
Loan for Professionals:
Every profession has a different set of requirements. To cater to individual business needs, many lenders offer specialised loans. There are separate loans for doctors, engineers, and chartered accountants. Such loans help them grow and expand in their profession. Say, you are a doctor and you want to set up your own clinic. You can easily fund your dream with a Doctor loan. Most lenders offer loans up to Rs. 30 lakh without any security or guarantee.
Loan Against Assets:
An asset is a valuable thing that you own such as a house or a car. It also includes financial securities such as shares, bonds, fixed deposits (FDs). Such assets turn out to be helpful while borrowing. Taking a loan against an asset is easier. This is because you provide certain security to the lender.
You can take a loan against your property. The lender becomes the legal owner of your property if you are unable to repay on time. Your financial securities, such as shares, can also be useful while taking a loan. You can pledge your securities with the lender. Lenders usually provide loans up to 50-70% of the value of your shares.
You can also fund your business with gold. Lenders offer loan against the security of gold. This becomes an easy way of ensuring the smooth functioning of your business. The next option available to you is that of taking a loan against your FD. You can borrow up to 90% of your FD amount without breaking it.
Terms loans are loans that you can take for a specific tenure. These are classified into three categories based on the tenure – Short-term loans, Medium-term loans, and Long-term loans. You can take a loan as per your repayment capability. Lenders usually offer flexible repayment options. You repay the loan in Equated Monthly Instalments (EMIs). You can choose your EMI schedule. You can also foreclose your account with minimum or charges.
Flexi loans work like overdrafts. Such loans offer a credit facility to you. You can take a flexi loan of a certain amount. However, you pay interest only on the amount that you use. This reduces your interest cost. Flexi loans are good financing options for businesses. This is because every business strives to reduce its operational cost. The money that is saved can be used productively. It, thus, helps them grow profitably.
The bigger your business, the greater might be the need for finance. Business loans fulfil your financial needs. To get the right finance at attractive rates, you can consider lenders like Bajaj Finserv.