Funding your firm isn’t a big worry in India as there are several different kinds of business loans available here. Understanding the various business loan options will help you make a smart choice whether you are establishing a new firm, growing an existing one, or in need of operating cash. In this post, let’s learn about at least 7 popular business loan types in India.
7 Popular Business Loan Types In India
Loan Against Property
Term Loans
Working Capital Loans
Startup Loans
Invoice Financing
Business Overdraft
Business Loan For Women
1. Loan Against Property
A person can get this type of loan by pledging their property as security. The repayment term for a loan secured by property ranges from 10 to 20 years. In order to obtain this type of business loan, the borrower must mortgage their assets. There is no restriction on what kind of asset the borrower may use as collateral. Usually, the lender will grant a loan for 70% of the property's worth. The property being pledged as security, however, must be free and clear of any active legal proceedings.
2. Term Loans
Term loans are one of the most popular kinds of company financing. They provide a lump sum amount that is to be repaid with interest over a certain period of time. Term loans are suitable for long-term investments like purchasing property, expanding operations, or starting a new business. These can be secured or unsecured business loans, depending on the borrower's creditworthiness and available collateral.
3. Working Capital Loans
Working capital loans are used to cover routine business costs such as purchasing goods, paying employees, or addressing cash flow issues. These loans provide short-term financing to meet pressing company needs. Working capital loans can be either short-term loans or revolving credit lines, depending on the borrower's need.
4. Startup Loans
These loans were specifically designed to support new firms in their early stages. Startup loans help business owners cover the expenses of beginning a firm, purchasing merchandise, hiring staff, and marketing. These loans generally need a strong business plan, collateral, and the entrepreneur's personal investment.
5. Invoice Financing
Sometimes referred to as accounts receivable financing, invoice financing enables companies to acquire capital by selling their outstanding bills to a financial institution. Thanks to this type of loan, unpaid invoices are converted into immediate working capital which helps firms improve their cash flow. The lending company takes money from the customer right away and advances a percentage of the invoice total.
6. Business Overdraft
The only way a company can use a business overdraft is if they have fixed deposits with the lending institution. Lender considerations for this loan include the business's history of repayment, cash flow, set deposit conditions, and other factors. The borrower can get the appropriate amount with this type of loan and just pay interest on what is really used.
7. Business Loan For Women
Some banks and lenders offer female entrepreneurs an exclusive financing option. The objective is to support women who are beginning small to medium-sized enterprises. A few of the unique benefits include flexible loan amounts, reduced interest rates, and quicker loan processing.
Conclusion
It is always essential to choose a business loan based on the requirements and characteristics of your firm. Having learned about the 7 popular business loan types in India, you can now pick a financing option that is best for your business.
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