After many years of struggle in a regular bank job, Avinash Jain, 32, is now planning to start his own business venture. And, for that, he needs an office space, new equipment, inventories. In fact, he also needs funds for ongoing as well as other expenses like salaries, marketing costs, etc. However, Avinash being a salaried individual for many years not being able to accumulate enough savings for his new venture. Thus, he needs few lakhs so that his business can easily be started. So, here comes a big question- Can Avinash get a business loan or institutional funding easily? What are the best options available for him? From where he can easily avail the loan that will best suit his business needs? Well, read this article further to know the answers.
When it comes to business loan, it is surely a best option when bootstrapping through business expenses is not going smooth. Many banks and NBFCs would be more than happy to offer you a business loan so that your diverse needs such as business expansion and diversification or both can easily be fulfilled. With the help of this loan, businessmen can easily meet their working capital needs and can grow/expand their business without any hassle.
To give you more clarity on this, let's focus on some important points below, describing how business loan is a boon for entrepreneurs.
Savings Intact: If you take a business loan, there is no need to liquidate your savings. Yes, this means you can keep your savings for rainy days especially when some business emergency may come in the future.
Hassle Free Process: Many lenders in the market provide business loans without even asking for any collateral or security. Thus, in that respect, many businessmen can avail the loan in order to meet their cash flow needs. In fact, now you can avail any service online and get all the required details such as payment schedule, repayment history, interest certificate, etc by sitting at home.
Various Options=Maximum Flexibility: These days with the availability of many types of loans, business owners now have plenty of options to choose as per their requirement. For example-say if working capital loans can meet the operational expenses needs of a business , whereas term loans are a good option to fund your business needs in short to long- term. Moreover, overdraft facility is another option, wherein the borrowers are permitted to overdue their current account according to agreed terms and conditions.
Other business borrowing options are-start-up loans, professional loans, loan against property, gold loan, cash credit facility and letter of credit facility. Thus, borrowers can have more flexibility not only in terms of loan types, but also with respect to quantum required to operate their business optimally.
Affordability: When it comes to business loan interest rates, they are not exorbitant, opposite to what is conventionally believed. Your business loan interest rates are calculated on various eligibility parameters like financial situation and credential of borrower, loan tenure, market dynamics and many more.
Below is the table showing interest rates, tenure, loan amount offered by various lenders for business loan.
|Name Of Bank||Interest Rate||Loan Amount||Tenure||Processing Fee|
|SBI||Starting From 11.30% p.a.||Up to Rs. 20 crores||Up to 15 years||-|
|Axis||13% p.a – 18% p.a||Up to Rs. 1,50,00,000||3 years||1.25% - 1.5%|
|ICICI||Starting from 12.90% p.a||Collateral Free up to Rs. 1 crore||Up to 7 years||Up to 2% of loan amount|
|HDFC||16.25% to 19.40%||Rs. 50,000 - 40,00,000||Up to 3 years||Up to 2.50% of the loan amount|
|Kotak Mahindra||15% p.a.||Rs.3,00,000 – 75,00,000||3 years||2% of the loan amount|
Easy Repayment: Business loans are available with different repayment options as per borrower's suitability. Yes, both the lender and the borrower can together find the most viable repayment plan by keeping in mind the cash flow of borrower. Being a borrower, you can easily choose to increase or decrease your EMIs outgo, depending upon your financial situation. This flexibility in repayment actually helps you with financial difficulties, and acts as a safeguard.
Tax Benefits: Interest payment made via business loans can also be claimed for tax deductions. So, you can easily claim the tax benefits on the interest component of the loan.
Strong Credit Rating: Business loans can conveniently be taken for large sums, and can be used immediately, depending upon the needs of borrower. In fact, taking business loan also helps in making a strong credit rating, which ultimately adds more brownie points while securing loans in the future.
Business Growth & Substance: Once you avail business loans, it ultimately helps in fulfilling your funding needs so that you can manage all the operations very smoothly as well as effectively. For businesses, which are in the pipeline of expansion or diversification mode or both can capitalize on business loan in many ways so as to move up the value chain.
Business Loans for Small & Medium Enterprise (SMEs): If nature of your business belongs to SME sector, it is good news for you. In order to ensure equality and availability of business funds for SME, the Reserve Bank of India (RBI) has instructed banks to give priority to SME sector, so that businessmen can get funds/credit without any hassle.