How To Secure Finance For Your Business?
An unsecured business loan can prove very effective in bolstering your working capital management needs and to help with business expansion.
The three most important components of business growth are – employing the right people, implementing the right processes and getting sufficient financing. Of these, the third is perhaps the most essential. Securing an uninterrupted flow of working capital finance is integral to the success of your business.
Lack of a good source of financing can create roadblocks against future growth and expansion. It could also lead to a complete standstill in day-to-day business operations. To ensure this does not happen, you should know about all the possible avenues of financing for your business, so that you can select the best from among them.
The Best Ways To Acquire Business Finance
Listed below are the most trusted ways in which you can give your business the opportunity for expansion:
Equity is basically the cash that is invested in a business. This cash could come from the owner or be contributed by investors. When investors put cash into your firm, they expect to receive a part of your business profits as well. Additionally, they can also gain control over your company if allowed to purchase a high number of equity shares. Therefore, this method is not suitable if you wish to retain both profits and ownership of your business.
Debentures carry a fixed rate of interest and a certain maturity date. Interest on them has to be paid every year, and the principal can be paid at the end of the year. They offer tax benefits, and do not require you to share control of either ownership or profits. The only disadvantage is that since you are obligated to pay the debenture holders, you cannot delay the payment or your business will face legal hassles.
This mode of financing allows a bigger pool of small investors to finance your business and imposes fewer restrictions on how you run your enterprise. It can be useful, but takes a lot of time and energy. It essentially involves sharing your ideas with the public and asking for their support to meet business expenses.
There are some firms called factoring companies who take care of collecting any outstanding money owed to you by customers in the form of invoices, and immediately pay around 70% of the total value to you. Although it offers quick capital, this is not a recommended way of obtaining business finance since these companies often charge a high fee for the service.
Unsecured Business Loans
The most popular way of securing finance for your business, this method does not require you to give up ownership rights or benefits. With attractive interest rates and flexible repayment tenors, business loans can be a smart way to finance your business, whether it if for working capital needs, machinery purchase or other expansion requirements.
Line Of Credit
A line of credit is a type of business loan, with additional benefits to help you manage your business’s cash flow better. In this method of financing, you just have to pay interest on the loan amount you utilize from the credit line extended to you. Thus your EMIs are kept to a minimum, helping you to manage your monthly finances more easily. The principal component can be repaid at the very end of your tenor. You also gain the freedom to part-prepay your loan when your business does well and you have additional funds in hand. You can keep availing as much money as you need from within the credit line, based on your needs. This facility is especially useful when your business has fluctuating financial needs.
Both the unsecured business loan and the line of credit are the best options to finance your business. Bajaj Finserv offers Business Loans with Line of Credit facility, with a high loan amount of Rs. 30 lakh and quick approvals in just 24 hours.