When you start your business, whether it is manufacturing or service, it requires you to dedicate all your resources and work wholeheartedly towards turning the business venture into a success. Time and hard work are two resources that you can invest fully without any second thoughts. However, when it comes to money, there is only a limited amount that you have at your disposal.
Initially, when it is time to start the business operations, you would be willing to invest all your savings without any second thought. But after a while, when the investment initially made is absorbed in the business operations, you would need to look at alternate sources of funding to meet the requirements, in terms of instant loans.
There are few other options which involve you giving up a part of your ownership in the business, such as equity financing. Nevertheless, this option may not be acceptable to you. In such a situation, the best option that you can choose is taking an unsecured business loan from any of the best business loan providers in India.
Various financial institutions offer instant loans for business, such as banks and NBFCs. Due to their innovative products and transparency in operations, NBFCs are becoming the most popular category of business loan providers in India. They are online lending companies, and with their customer-friendly approach and convenience of application, they have become the most sought-after option for business owners looking for an instant small business loan.
NBFCs are specialized financial institutions that offer a wide range of business loans through their website and mobile App. You need not visit any office or meet any person but log on to their website or mobile App. You just need to provide basic personal and financial information for the application to be processed successfully.
Unsecured business loans from NBFCs don’t require any collateral to back the loan amount. If your annual turnover is more than Rs. 10 lakhs, then you can avail an unsecured loan for the business of up to Rs. 5 Lakhs for any business-related requirements. You can also opt for a maximum repayment tenor of 24 months. It ensures that the EMI amount is affordable and does not put any pressure on the finances. These online lending companies follow a paperless procedure wherein you need to provide the PDFs of the required documents to process the application.
Apart from the CIBIL Score, NBFCs have their credit evaluation process as well that they use to calculate the creditworthiness of the borrower holistically. It increases the chances of business loan approval significantly. They follow a transparent process wherein you are regularly updated regarding the status of your application; this eliminates the need for making repeated visits to the bank.
Why Instant Loan Amount should not be invested in fixed assets?
There are various options at your disposal regarding how to use the business loan amount. You can use it to purchase new machinery or equipment, payment of urgent expenses, payment to suppliers, working capital requirements, etc. It is entirely up to your discretion as to where you want to use the amount in your business, but you need to be cautious to invest this money in productive activities only which are directly associated with the company and not use it to create your savings or invest in non-productive assets.
Here are certain rules that you need to follow while using the business loan amount:
- The amount you have borrowed carries an interest cost which must be borne by you as an expense. Thus, you need to invest it in activities that offer you more income than the expenses incurred, including the interest payments. For instance, if the interest rate against your business loan is 24%, then the expected increase in returns should be more than 50%.
- Always invest the borrowed money for productive expenses, such as purchase good machinery, upgradation of infrastructure, etc. which will help boost your output, improve the quality, and lower down the expenses involved.
- You can use the business loan amount to pay for urgent expenses that carry a higher interest rate. This will help you save a lot of money on the interest cost.
- Invest in fixed assets like real estate only if you intend to use the space for your business-related activities. Using it as a source of rental income or just as an investment in property is a dangerous idea.
It is very important for you to use the amount that you have borrowed as a business loan for productive activities only, which are directly associated with the business. Using the money to create savings or expecting appreciation in real estate value is only going to burden your fragile finances further. So, use instant loans only in productive activties.