Accumulating ample funds to support a business – established or starting out, can be a difficult task. Making a start-up prosper or expanding an existing business calls for external financing more often than not.
There is an array of business requirements, and financial institutions provide different types of a business loan to cater to each of this. This makes it easier for entrepreneurs to choose the exact type suiting their requirement.
Uses of business loan
Here are some of the most prominent uses of commercial loans based on their type.
- Equipment purchase
Increasing sales is intrinsic to a company’s growth and prosperity. To reach this goal, enterprises need to integrate the latest technologies and equipment necessary for effective production. Purchasing efficient machinery can be overbearingly expensive and calls for equipment financing. These are secured funds offered with a fixed tenor and are especially beneficial, given that NBFCs take the equipment as collateral.
- Working capital
A steady cash flow is important to facilitate smooth operations in an organisation. Keeping up with these expenses can strain your sales revenue. Your enterprise might also experience a shortfall of finances, especially if its services are seasonal. A working capital business loan can aid in bridging the temporary cash-flow gap in such circumstances. Acquired funds can be used to finance rent, operation cost, and employee paychecks. You must chalk out how much working capital your business needs before applying for one, to avoid burdening yourself with unnecessary debt.
- Expanding workspace
Once established, entrepreneurs might want to expand business operations or extend services into new industries. To aid in the process, companies can opt for a term business loan to finance the purchase of office space or any other type of commercial property. Depending on eligibility and business vintage, entrepreneurs can avail lower interest rates.
- Stocking inventory
One of the major hindrances start-ups face while acquiring external funding is lack of collaterals. When lacking assets to pledge, companies can use commercial loans to purchase new products and restock inventory. This will aid in boosting sales, thus enhancing brand name. Also, while applying for the same, you must ensure that your business loan does not pinch your budget.
With such benefits and more, commercial business loans offer variegated benefits to borrowers. Nonetheless, one should determine the exact requirements for his/her business before opting for such a loan to optimise the benefits.
Further, to facilitate the prompt transfer of funds to aid in the above utilities, leading financial institutions like Bajaj Finserv pre-approve unsecured funds, including commercial loans. These pre-approved offers are also available on other financial products, including business loan, personal loan, credit card, etc. If you are an entrepreneur looking for credit, always check your pre-approved loan offer beforehand by submitting a few details like name and contact information.
Also, to undergo a successful application procedure, make sure to meet the required parameters.
Are you eligible for a commercial loan?
NBFCs make sure applicants meet the following business loan eligibility criteria to qualify for such financial products.
- Age: Must be between 25-65 years.
- CIBIL score: Should be 750 and above.
- Residence: Must be a resident of India.
- Business vintage: Must be at least 3 years.
Additionally, applicants need to submit income tax returns filed for the past 1 year, under mandatory documents.
Once qualified and the credits approved, applicants can enjoy loan disbursal as early as within 24 hours. Thereafter, they can avail business loan up to Rs.45 lakh, according to their eligibility and requirements.
