Benefits you should know of taking business loan

“To keep numbers from multiplying you have to add them up” is a true saying. A business needs money from time to time to stay in the green. Most business owners want to expand their businesses, but money is the only barrier to your business’ growth. However, loans are a simple solution.

Local lenders charge high-interest rates with no benefits. The collateral security conditions also make it tough to borrow money.

You can apply for a business loan and access the funds you need. You can check your eligibility for a business loan and apply for a low-interest-rate loan online. 

What is a business loan?

Business loans are provided by a bank or lender to cover business expenses. These expenses can include expansion, renovation of offices, new hiring, etc.

You can repay a business loan through every monthly instalment (EMI). Lenders provide various EMI options. However, your loan tenure will change depending on the EMI you choose.

What are the top business loan options?

Here are some loans provided by the government, financial entities, and lenders for business expenses.

• Mudra Loan: This is a product under Pradhan Mantri Mudra Yojana’s (PMMY) flagship program. This provides financing to micro enterprises in India.
• Business loans from banks and lenders: Banks and financial institutions provide various loan options.
• Equipment loans: Equipment loans are provided for purchasing or repairing equipment owned by the business

What are the benefits of getting a business loan?

There are multiple benefits of applying for a business loan to finance your growing business needs.

1. You do not have to wait.

If you are planning to start your new business but are short on money, you can apply for a business loan. Business loans do not have comprehensive processes. A business loan will help you if your start-up is waiting for investors. A loan will speed up the process of launching your start-up.

2. You can grow your business without barriers.

Your business plans will no longer be on hold when you apply for a business loan. You can launch new outlets, hire new employees or launch new products without worrying about funding.

3. Business loans are flexible.

You can enjoy 100% decision-making rights on the business loan principal amount. Banks and NBFCs do not interfere with your decisions as an investor would. This benefit makes you independent.

4. Business loans have affordable interest rates.

NBFCs and banks offer low-interest rates for business loans. This allows you to reduce the loan burden without compromising on the principal amount you need for your business.

5. There is no profit sharing.

If you borrow money from an investor, they will demand a percentage of the profit. But, business loans do not ask for profit. You only pay the principal amount and interest amount. Both of these are agreed upon beforehand.

6. You do not need collateral.

Most lenders do not ask for assets as collateral when applying for a business loan. You must provide an income statement as proof for a business loan. However, you may be asked to provide collateral if your creditworthiness is very low.

7. You get tax benefits.

Business tax increases as your business grows. But while applying for a business loan, check if interest rates are tax-deductible. Claim the most profitable business loan with low-interest rates. 

8. Your business credit increases.

Business loans improve your financial reputation and credibility. It helps you get a low-interest-rate business loan in the future. All you have to do is pay your EMI on time. Paying bills on time will help to maintain your credit score.

9. The application process is simple and efficient.

Business loans need minimum documents for verification. So, the loan is sanctioned easily. Provided you provide the correct documentation, your loan can be approved in a week!

10. It will solve your cash flow issues.

Cash flow management can be difficult and confusing. A business loan helps businesses manage expenses and income. If you have immediate cash flow issues, a business loan can help.

What are the eligibility criteria for a business loan?

• You must be a resident of India.
• Your business should have been running for the past three years.
• Your CIBIL score must be greater than 685.
• Your age must be between 24 and 70 years.
• Your work status must be self-employed/business owner.

What are the documents required for a business loan?

You have to prove that you meet the above criteria. You can do so by attaching the following documents to your application.

• Identity proof (Aadhar card, PAN Card, Passport, Voter ID card, or driving license)  
• Address proof of business (utility or electricity bills)
• Proof of business ownership (incorporation documents, property lease, etc.)
• Income tax returns for profit proof from the business (minimum three years). 
• Other financial documents as requested.

TIP: Use an EMI calculator before applying for a business loan.

EMIs are fixed amounts you pay to the lender after your account has been credited with the loan amount. The amount is a mixture of interest and the principal loan amount. You can calculate the EMI amount using an EMI calculator. Once you calculate the EMI, you can determine if you can afford the business loan. Such calculators allow you to input the interest rate, tenure, and principal amount and calculate your EMI.

Conclusion

A business loan can help you boost the growth of your business. Now that you know the benefits of business loans, you can compare and choose the best business loan. Avail of the best business loan for financial support to grow your business. Banks and NBFCs offer several loan options, look and compare the best for your business.

If you don’t know where to start, you can take a look at Piramal Finance business loans and understand where to begin.