Enterprises, medium and small, frequently obtain funding at various stages. Business loans offer businesses much-needed capital to handle operating costs to navigate through a financial crisis. There are multiple areas where you can utilize the funds to take your company to new heights. Keep reading to learn about them.
- Daily operations
Various costs are linked to your business that you must meet to ensure the smooth running of your firm. You must pay for expenses like marketing, office space rent, stationery bills, and so on.
In order to deal with such expenses, you may apply for a term business loan or a working capital loan. If you are operating at a low level, term loans are perfect. The maximum amount available under this loan is Rs 25 lakhs. On the other hand, working capital loans are a secured kind of borrowing with a maximum value of Rs 5 crores.
- Equipment/ Machinery purchase
Equipment and machinery are essential components of any business. If you are a medical practitioner, you will need to spend money on an X-ray machine, CT scanner, and so on. Similarly, if you operate a factory, you will need to purchase various heavy equipment to help you meet the increasing need of your customers.
Financing such machinery necessitates a significant investment. In case you plan to pay for the purchase out of your own money or from business revenue, it may put a significant dent in your budget. As a result, seeking a medical equipment business loan is your best option.
- Tenant improvements
As an entrepreneur, you should be aware that purchasing a new office space straight away is not always a sensible decision. The best alternative, in this case, is to move to a rented office space. However, you will be in charge of numerous construction works such as building cubicles, cabins, and so on. You will also need to spend money on things like setting up a cafeteria, purchasing new furnishings, purchasing a desktop computer, and so on.
When you add up the foregoing prices, it comes to a few lakhs. In this case, the term business loan is the ideal option. The business loan interest rate in India is based on your business creditworthiness. If you have never defaulted on debt before and your current account has significant transactions, you will be authorised for an inexpensive loan.
- Use as payroll
Your firm’s success depends on the talents of your personnel, regardless of how many new business orders or projects you obtain. Employees are critical to the longevity of your company. Onboarding new personnel necessitates a separate budget. Assume you are opening a new office in a new city. You wish to hire six people at Rs 30,000 per month each. In this instance, you will need to spend Rs 21.6 lakhs every year. In this situation, if you do not plan your spending carefully, you will be unable to pay your employees’ salaries. Thus, business loans are ideal for assisting you.
- Debt consolidation
Business liabilities include not just debt from financial institutions but also numerous pending account payables, credit purchases, and funds raised from private investors. In this case, seeking a business loan to consolidate debt is advised. If you have a good business profile and reliable financial records, you may be able to get a cheap interest rate loan quickly. Once approved, make a list of high-interest loans and unpaid bills that are affecting your credibility. Use the funds to pay off all of your debts at once.
Tips to Get an Affordable Business Loan Interest Rate in India
- Always have a plan in place. Lenders are interested in your sales and revenue projections. They may also inquire as to how you intend to use the funds. They require a documented blueprint since it assists them in determining whether your business has a future and will be able to repay the debts.
- Examine your existing liabilities. If you have a lot of debts or multiple missed EMIs, try to settle them first. Financial institutions gauge your debt-to-revenue ratio. If it is considerably below 50, you will hardly have difficulty obtaining a low-interest loan.
- The cash flow of your company is critical for business loan approval. It aids lenders in determining your company’s liquidity condition. If your company’s cash outflow exceeds its cash inflow, the lender will simply reject your application. The reason for this is such a circumstance suggests that you are having problems managing your current costs or are unnecessarily stockpiling short-term assets. Poor cash management is a warning sign of impending debt failure.
- Never disregard the lender’s qualification requirements. If you apply without understanding the qualifying requirements and are refused because you do not meet them, the scenario will influence your company’s credit score.
To conclude
Business loans can cover almost every single expense associated with your business. In order to get quick loan approval and a low-interest rate, you must follow the suggestions listed above.
