Pritpal Singh, owner of a mid-sized sports goods manufacturing company in Ludhiana, was in an expansion mode. While his project was in full swing, he realised the cash he had will run out soon, thereby risking his venture. Financial prudence led him to opt for a business line of credit. “My expansion plans didn’t suffer, thanks to the timely arrival of funds,” recalls Pritpal.

Pritpal’s case highlights an essential business philosophy. In times of growth and uneven cash flow, businesses must be flexible enough to adapt to change. “A line of credit should be on the radar of a business owner when in need of ready access to cash,” opines Delhi-based financial consultant Arun Chauhan. Let’s see the various benefits offered by a business line of credit.

Short-term Funding

“This mode of finance is the best bet for short-term funding to solve a liquidity crunch. Businesses can use this for meeting various needs like upgrading machinery, replenishing inventories, and training among others,” opines Arun.

Seasonal businesses like agriculture can use this source of finance for hiring labour and machinery at the peak season. We, at Bajaj Finserv, offer an MSME / SME Loan up to Rs. 30 lakh with a line of credit facility.

A Continuous Source of Finance

A business line of credit is subject to review and annual renewal. “In most cases, the EMIs consist only of the interest component. This brings down EMIs and results in savings. Moreover, businesses need to pay interest only on the amount used,” points out Arun.

Borrowers can deposit the funds when in access and withdraw the same when required. The limit may either drop or remain constant throughout the tenor, giving maximum availability of funds. Thus, it acts as a continuous source of finance.

Flexibility of Purpose

A business line of credit addresses a wide range of financing needs. While Pritpal used it to fund expansion, businesses often use it to:

  • Buy new equipment
  • Train employees on new technology
  • Install new software

“The flexibility of purpose helps in better management of cash flow and channelize funds where its required the most,” opines Arun.

No Need for Collateral

Offering a collateral during cash shortage can be a dilemma for businesses. However, a business line of credit is an unsecured source of finance where there isn’t the need for any collateral.

Arun says, “Most businesses in India, particularly small ones, are asset-light. They have very little to offer in terms of collateral for loans. In such a scenario, a line of credit is the most prudent financial choice.”

Bajaj Finserv’s Business Loans don’t require any collateral, which means business owners don’t have to put their personal or business assets on the line. Funding is faster, easier and requires less paperwork.

Competitive Business Loan Interest Rate

A business line of credit is available at a competitive interest rate. “A competitive interest rate coupled with the option to pay on the interest component on EMIs helps organisations save funds. The savings boost working capital to a great extent,” says Arun.

We offer business loans at competitive interest rates so that enterprises can make the most of them.

Building up Credit Score

Rational handling of business line of credit improves credit score. Improving the credit score helps business owners access bigger and larger financing resources later.

“In the loan market, credit score reflects the trustworthiness of the borrower. Credit score may affect the loan amount and rate of interest,” says Arun.

In a dynamic environment, running a business is a challenge. Depending on the need, a line of credit is ideal to overcome liquidity crunch for smooth operations.

If your business needs an infusion of cash to cover working capital or other needs, choose a Business Loan with a line of credit from Bajaj Finserv. With loan up to Rs. 30 lakh, nominal interest rates, the freedom to borrow and repay as per your needs, and interest charged only on the amount utilised, this is the ideal means of financing for growing businesses.

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