Overview Being a self-employed entrepreneur is a big step in society, but it also presents many challenges. To be a successful businessman, it is a huge challenge. Finance is one of the many problems that all business owners face. Finance has been a major problem for many entrepreneurs in different industries. They have had to deal with financial difficulties when setting up businesses and running their day-to-day business operations. Finance plays an important role in the lives of businesspeople. To grow a business into a success, great ideas need financial support.
Business people have many options to raise capital. Banks are the most reliable source. Banks are the best source of capital for businesses for many reasons. With Business Loans, banks offer lower costs of funding. Different interest rates are available for business loan types to help business owners solve financial problems.
Types Of Business Loans:
Different types of businesses require financing at different times in their business operations. Banks can provide different types of loans to help small and medium businesses raise capital.
New project loan – Banks want to finance new businesses as well as existing businesses. Banks have different criteria to obtain a new loan. The collateral for project loans is the property of the borrower, such as residential or commercial property, empty land, or vacant land.
Top-up on Existing loans These loans can be used to expand, replace, or diversify an existing business. These loans can be used to purchase goods, machinery, or other fixed assets on a short-term or long-term basis.
Working capital loans These loans are made to help businesses solve financial emergencies and can be repaid in a short time. Working capital loans are offered by banks against stocks, inventories and receivables.
Secured business loan – This is a way for companies to raise capital without any security. You can use your plot, commercial or residential property, gold, shares and bills as collateral to raise funds for your business. Preferably, the interest rate is lower.
Unsecured Small Business Loan – Since every businessman can’t afford to take out a loan secured by collateral, bankers offer loans that are not secured by bank transactions or income tax returns. These loans have higher interest rates than secured business loans.
Banks follow a variety of steps to release funds. Below are the documents and procedures to submit to banks
Identity and address proof for the company – Address proof or identity proof for proprietorship business.
Statutory legal company registration – This is whether the company has been legally registered under the government’s norms and has followed all legal procedures in setting up business.
The bank will be interested in the financial statement of the company.
The bankers use income tax returns (ITR) to verify the company’s performance, efficiency, and assets. They also check the tax the company is paying from current earnings. This is also a key factor in deciding how much loan money to give to business owners.
Financial Security – This includes both fixed and movable assets. It allows the banker to offer business loans based on asset value, as well as business transactions. Banks are protected from businessmen who fail to repay their loan amounts.
Banks will look at the past loan track to determine if the company is in a financial position. They also check the repayment history of loans.
Litigation – This will allow banks to assess the character and ability of businessmen before granting a loan.
Although business loans can be a great way to raise capital, it is often difficult for businessmen to get funds from banks on time. Even NBFC can now help businessmen with funding at different stages of their businesses in order to assist them in getting timely loans. The lending process has been made easier by NBFC and banks. All documentation is processed in a shorter time frame, and they offer doorstep assistance with document collection. Companies with high cash flow and good credit scores can get timely funds.