When availing a business loan, what types of loans to avail is the dilemma faced by every businessman. There are types of loans in India offered by loan lenders. So, all these types of loans and advances tend to make the businessman confuse. However, all these loans are designed based on the different needs of the business. So, in order to understand which types of loans for business are the best for you, you must understand the purpose for which you are availing it.
Let’s take a look at the different business loans you can avail in India:
Machinery is an important asset for any manufacturing unit. The number of products produced and the cost of production depends on the machinery or equipment. Machinery also determines the quality of the products produced. In addition, if you will be able to meet the demands and requirements of the customer or client will also depend on the machinery.
That said, machinery is very expensive as well. And it is not always possible for the businessman to take funds from working capital to invest in machinery. Nonetheless, it is important to upgrade machinery or equipment. So, a machinery loan can be availed to fulfill this need. These types of loans are offered by many loan lenders in India at the best interest rates.
Working Capital Loan
Also read: what are the types of working capital loan?
Working capital for a business is like oxygen. No matter in what sector business is – in the service sector, the manufacturing sector, or the trading sector, it requires working capital. Every business has some everyday operations and for their payment, it requires working capital. These expenses can be utility bills, office rent, salaries, etc.
In case a business is not having enough working capital, it can avail a working capital loan. A working capital loan can only be used for short-term expenses and cannot be used for capital investment.
Capital is the investment made by the business owner to start and sustain his business. It is the most basic requirement of the business owner. When starting a business, the business owners usually invests his savings. However, with time, his savings dry up and he requires an additional source of funds for the capital investment.
So, he can avail a capital loan to meet this requirement. A capital loan is also very beneficial when a businessman witnesses a growth opportunity but cannot accept it with both hands due to lack of funds. Notably, these types of loans are meant only for capital investment and business expansion and cannot be used for any other purpose.
also read: flexi business loans: advantages for MSMes
Every businessman faces a situation when he needs funds urgently. And he cannot even wait for a few days to apply for a loan and get it sanctioned and disbursed. In such situations, a flexi loan turns his savior. A flexi business loan is a new age loan where the loan lender sanctions the loan limit for the borrower for a specific time limit.
The borrower can use the funds up to the limits as and when required. He will be charged interest only on the amount used. Notably, the time limit for this is usually one year and the borrower can get it renewed every year.
When the businessman knows the term for which he wants to avail a loan for business, he can avail a term loan. A term loan is usually availed for a short-term period, specifically for 1 year. A term loan is also beneficial for small business owners as they can repay the business loan in the short-time period.