Are you one of the small business owners who is wondering whether or not to apply for a business loan? If yes, then this is the time for you to weigh the various business loan benefits against any drawbacks that this financial solution might have. For a small business owner, a business loan can facilitate a wide range of related activities, like expansion, operations, hiring and so on. However, to avail of this source of funding, borrowers must carry out a personal assessment.
Attractive that business loans for SME are, before applying you must ascertain how much financial aid you actually require, as also the timeline during which it could be put to good use. Next, check on the eligibility criteria, which is likely to vary from one lender to another, and then prepare a business plan outlining how you intend to use the funds.
In the event that you are eligible, discussed as follows are business loan benefits that can inspire you to apply –
Convenient – While it is common for business ventures to start small, at some point expansion becomes a priority, and it calls for financial investment. In such a situation, searching for an investor might prove to be more difficult than anticipated, not to mention time consuming. Comparatively, applying for a business loan is not just more convenient in terms of minimal documentation, but also relatively simpler in terms of time and effort.
Flexible – One of the biggest business loan benefits is that you get to decide how to spend the money without being answerable to anyone. Most lenders do not lay down conditions on how the money should be spent, and as long as the monthly instalments are paid in time, they do not get involved in the daily functioning of the venture. This grants you the flexibility to juggle the finances as you see appropriate.
No collateral – Lenders exempt collaterals while processing business loan applications, and instead focus on factors such as eligibility, documentation and credit score. This renders the business loan as being unsecured, which implies that you can avail of it without losing any of your assets.
Adding to the working capital – Liquidity matters a lot in determining the smooth functioning of a venture, and this is where business loans can truly help. Working capital is an aspect which all ventures need to be mindful of, and business loan benefits the entrepreneur by adding to the existing amount. Not only does this ensure fulfilling of daily financial needs, but also cushions the venture against unprecedented financial contingencies.
Swift disbursal – Given the minimal documentation involved while processing business loans, usually lenders disburse them on the same day or the next day. This works well for the business owner too, as there is no need to halt operations or compromise on procurement due to lack of funds.
Reasonable rate of interest – An aspect that sets business loans apart from other financial solutions is that lenders have the leeway to adjust the interest rate to suit individual circumstances of the borrower. Since a business loan is also a viable tool to attract customers, lenders peg a reasonable figure so as to make the product more competitive.
Business loans for SME could take various forms, and a common option is a balloon loan, wherein the borrower pays only the interest rate on a monthly basis and the principal amount when the loan matures. It could take the form of a term loan to cater for a sizeable one-time expenditure, or equipment loan which could be used to replace old and outdated machinery with latest versions.
Other business loan benefits include easy availability of emergency funds to tide over a crunch situation, and provision to fulfil purchase orders and cover for unpaid invoices.