Business loan is an umbrella term that includes a variety of funding that is given to businesses for their various requirements. Lenders are mandated by law to lend to businesses especially small and medium size businesses.
How to get a business loan:
A business loan can be applied either online or offline through the lender’s branch. Several lenders may pre-approve businesses for a loan. The first step to getting business loans is to check the eligibility criteria that a lender may have.
The most common business loan eligibility criteria relate to minimum net profit and minimum turnover requirements for the business. The business must also have a positive net worth and favourable business ratios. Apart from that, the business has to specify the reason for the loan.
Most lenders have a business loan EMI calculator on their website which helps businesses to calculate their loan eligibility and also find out the funds that they can get from the lender. It is best to use these calculators before applying to different lenders.
Types of business loans:
There are different types of business loans to suit the needs and requirements of different businesses.
1. Term loan:
This is a long term loan taken to buy fixed assets such as land, building, equipment, machinery etc. These types of business loans are long term in nature and are mostly used for capital expenditures. These type of loans are generally secured loans and are backed by the asset that the funds are used to purchase.
2. Cash credit and Overdraft:
An overdraft facility is a type of temporary loan against the current account. Interest is only charged on the actual amount of overdraft. This type of loan is a temporary loan that does not have any fixed repayment tenure.
3. Government scheme loans:
Recently, to promote startups and businesses in the country, there are few schemes under which a business can avail funds:
• Pradhan Mantri Mudra Yojana: Loans under this scheme are given based on the fund requirements and growth stage of the business. These are collateral free loans
• Stand up India: This scheme is specially for women, scheduled caste, scheduled tribe entrepreneurs. These loans are backed by credit guarantee and can be used for any purpose
• Startup India: Under this scheme, startups in particular are provided funding for their growth and expansion.
4. Letter of credit and Bank guarantee:
These types of funding are primarily required by importers while importing goods or services. A bank guarantee provides a guarantee to the opposite party that the sum in question will be paid.
5. Equipment and invoice financing:
Invoices are financed by discounting agencies where these agencies provide the funds upfront and collect the invoice amount from the customers. This is one of the ways to raise quick finance by discounting receivables.
Equipment finance are special finance schemes for businesses that need to buy different equipment. These may be leasing schemes or other finance schemes to acquire the equipment.
How to get a business loan:
A business loan can be applied either online or offline through the lender’s branch. Several lenders may pre-approve businesses for a loan. The first step to getting business loans is to check the eligibility criteria that a lender may have.
The most common business loan eligibility criteria relate to minimum net profit and minimum turnover requirements for the business. The business must also have a positive net worth and favourable business ratios. Apart from that, the business has to specify the reason for the loan.
Most lenders have a business loan EMI calculator on their website which helps businesses to calculate their loan eligibility and also find out the funds that they can get from the lender. It is best to use these calculators before applying to different lenders.
Types of business loans:
There are different types of business loans to suit the needs and requirements of different businesses.
1. Term loan:
This is a long term loan taken to buy fixed assets such as land, building, equipment, machinery etc. These types of business loans are long term in nature and are mostly used for capital expenditures. These type of loans are generally secured loans and are backed by the asset that the funds are used to purchase.
2. Cash credit and Overdraft:
An overdraft facility is a type of temporary loan against the current account. Interest is only charged on the actual amount of overdraft. This type of loan is a temporary loan that does not have any fixed repayment tenure.
3. Government scheme loans:
Recently, to promote startups and businesses in the country, there are few schemes under which a business can avail funds:
• Pradhan Mantri Mudra Yojana: Loans under this scheme are given based on the fund requirements and growth stage of the business. These are collateral free loans
• Stand up India: This scheme is specially for women, scheduled caste, scheduled tribe entrepreneurs. These loans are backed by credit guarantee and can be used for any purpose
• Startup India: Under this scheme, startups in particular are provided funding for their growth and expansion.
4. Letter of credit and Bank guarantee:
These types of funding are primarily required by importers while importing goods or services. A bank guarantee provides a guarantee to the opposite party that the sum in question will be paid.
5. Equipment and invoice financing:
Invoices are financed by discounting agencies where these agencies provide the funds upfront and collect the invoice amount from the customers. This is one of the ways to raise quick finance by discounting receivables.
Equipment finance are special finance schemes for businesses that need to buy different equipment. These may be leasing schemes or other finance schemes to acquire the equipment.
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