Small manufacturers have various reasons for availing business loans. The reasons vary from the age of the business to its expansion plans. It is a fact that the new small manufacturers have a hard time getting a loan approved from a bank. However, they have different options to explore when it comes to financial aid :they can take government grants or take a loan from a financial institution.
A loan could prove to be a lifeline for any small manufacturer and his business. Here are some the ways in which small manufacturers can use business loans:
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Small manufacturers can take out machinery loan to purchase types of equipment
Buying equipment or leasing it is a huge decision for any business, however, both the options have their positive and negative sides. Purchasing equipment for your business is often considered a more valuable option. You can take out a business loan to buy your machinery and equipment and get a tax rebate for the same in the first year of your business. The equipment’s value can be depreciated over its working life and then it can be sold for its salvage value. For small manufacturers, buying machinery is a better option than leasing it. It is because the cost of maintenance on leased equipment is often high, which becomes an additional expense for the venture.
For the acquisition of new machinery, you can apply for MSME business loan with the various banks. For a hassle-free MSME loan process, many banks have made their application online. The digital presence of all the banks makes it easier for you to inquire about your eligibility and interest rates on loan schemes for small-scale business. For such a purpose, the banks usually provide intermediate business/machinery loan India i.e. their loan period is between 10-15 years.
Small manufacturers can obtain a business loan to purchase inventory
If you have a manufacturing business, you will apparently be looking for ways to finance your inventory. Taking a business loan to meet your clients’ orders for at least the next 6 months is a viable option. However, small manufacturers need to be assured of their payments from the clients’ end.
For a loan requirement for such a small period, small entrepreneurs can opt for taking out a loan from peer-to-peer companies rather than taking a bank loan. Chances are that banks won’t accept your loan request for inventory. You can pay the lender (peer-to-peer company) using the sales proceeds. These companies usually have exorbitant interest rates thus paying the loan amount within the stipulated time is the best decision for any small manufacturer.
To meet the requirement for working capital, small manufacturers can get a working capital loan
You must have taken into account the amount that you need for your working capital. If a business plan for small manufacturers isn’t financed by investors, they can take help of a bank or a third-party finance company to fund their business requirements. There are many industry-specific small manufacturers associations(such as Indian Small Scale Paint Association and Small Enterprises Association) advising small-scale businesses on how to generate funds and train their workforce to facilitate business growth.
Working capital is required to run the regular activities and operations of a business. Until your business doesn’t earn enough revenue to run its operations without any financial assistance from an outside entity, taking a business loan would be the best option.It enables you to keep your business running and thus explore the growth opportunities. For a working capital loan, even the banks offer short-term funds, however, all small manufacturers must know that this kind of loan has higher interest rates than a business loan. You can check with the various banks to know what do their offer; you can check their websites or talk to their representative to get a good clarity on the cost of your loan.
Small manufacturers in India can take financial aid for expanding their operations
SME financing India is an option given by a lot of banks and non-banking financial institutions to help small manufacturers expand their business operations. Small manufacturers can expand the horizon for their business’s growth and success with the financial aid. It gives you a chance to introduce new product line or service of your business or take a step towards opening branches of your business in new cities.
You can apply for an MSME loan with a bank or can take government grants. For both these options, check MSME loan apply online option to make your loan application request faster and quicker.
Small manufacturers can buy real estate with loan amount
If you are a small manufacturer with a set-up business, you can easily apply for a business loan with a bank in order to set-up a factory or an office. Your settled business indicates the wellness of your profit and loss thus increasing your chances of getting a bank loan without many troubles. Loan for real estate purchase is called mortgage and the term for such loan is between 25 to 30 years. You must know that the property (or real estate) that you will be buying using the loan would be used as a collateral or a guarantee by the bank.
Small manufacturers can use the business loan amount to not only grow their business but also create a good credit history of their venture, which later on can become a threshold to negotiate better payment terms with vendors. Investment adds life to any business; taking a business loan for your company, especially for small manufacturers, can prove a critical step towards a prosperous future. Small manufacturers who have set up a business with a continuous stream of revenue, can also make use of the loan amount to recruit experienced employees or industry experts.
