Reasons Why Business Loans are Financially Beneficial6 May 2019
Reasons Why Business Loans are Financially Beneficial
Finance is the backbone of every business. A firm, especially one that has come into being just a few years back, may require adequate amount of capital to fund anything from a new division to equipment to office supplies, or even pay the salaries. If you are an entrepreneur, one important question that you’ll constantly think about would be – is getting a business loan a good idea?
Although the reasons for a business loan can be aplenty, many times, entrepreneurs hesitate in taking one, completely overlooking the financial benefits of business loans.
So why is a business loan important when a business needs funds? If you are in the notion that you only need a loan from a traditional financial institution when expanding your business, it is time to think again.
A small business loan taken from a financial institution rather than the traditional money lending market can be beneficial in many ways, more so, when all your profits are being used to make the business stable.
However, a crucial point to remember here is to opt for trustworthy financial institutions who have simple eligibility criteria and hassle-free process to make it a smooth sail.
Financial Benefits of Business Loans
- Manage working capital:
- Restructure debts:
A business requires money for a lot of things. There are chances that this money has come from different sources, including the traditional money lending market, family and friends too, all at varied interest rates.
Taking one loan that covers all of them, at a uniform interest rate can help save money, which can be further utilized in expanding the company. Also, repaying loans in a timely manner ensures that you get a loan easily the next time you have a requirement.
- Choose what fits your needs:
- Fund your projects:
It helps to expand the business by launching a new product or diversifying. A business would grow when there’s an increase in sales, which also requires an increase in production. Having sufficient finances for both research and execution enables a business to effectively and efficiently enter a new market with a new product.
A business loan is a convenience with a flexible tenor to finance activities that eventually would lead to the firm’s profits.
- Easy repayment options: Business loans now come with convenient repayment options that make sure that the business can pay back the loan with ease. One can even lower or increase the periodic EMIs as required.
- Expand your business: A business loan helps in the acquisition of assets. Every business requires those few equipment that enables it to run smoothly and meet every requirement.
For example, an architecture firm may need assets like drafting machines and auto CAD software that are all essential for business operations, but are expensive. A business loan can help lease or buy specialised machinery and increase your firm’s productivity.
- Collateral free loans: Most NBFCs are collateral-free in nature, making it easier for small business owners to avail funds and sustain their ventures.
- Be the decision maker: Another factor that would help you decide for a business loan to meet your financial requirements is that NFBCs who lend you money do not influence how you chose to spend it on your business, unlike other investors. More than often, having an investor means that you have to work alongside them or keep them in the loop.
On the other hand, as long as you are repaying the debt on time, a financial institution will not bother you. This also ensures that all the profits that you make are at your disposal, helping you work better towards achieving your business goals.
It helps you manage your working capital requirements and expand your business without any difficulties that you may face when trying to secure a loan from the market, or pulls funds from your firm’s savings.
A business loan helps to maintain the cash-flow in changing economic climate to meet unpredictable expenses, strengthening your financial stability during lean periods.
Thanks to a number of non-banking financial companies a business loan now comes with the flexibility of choosing one that fits the exact requirement.
From tenor to the amount, Fintech companies like KNAB Finance, for instance, offers a varied product list, each helping a business owner fulfil their requirement based on a plan that suits them the best.
Also, fuelling a project out of one’s own pocket can be a risky thing. Instead, opting for a small business loan makes much more sense as this way you can keep your savings as a back-up, further using them to expand the business.
Moreover, loans these days offer competitive interest rates that depend on factors such as the tenor of the loan, duration of the business in existence, collaterals, and creditworthiness. NFBCs also provide loans nowadays at a nominal processing fee and without any pre-payment penalty that can help a borrower save on the lending cost.
Points to Consider When Applying for a Business Loan for SME
- Be certain of the loan amount and borrow enough to cover only the expenses. Any kind of loan is considered a liability especially when you have apply for additional loans or credit cards in the future.
- Understand the interest rate, either fixed or variable, when considering business loan options. This calculation will impact your repayments.
- One of the major benefits of an unsecured business loan is that you do not need collateral when applying for one. However, the interest rate may vary compared to a secured business loan due to this.
- Have a clear understanding of how much profit will your business make in the next few months before applying for a loan.
Be it paying for recurring operating expenses, buying office space, acquiring a new business, training your staff, re-modelling or renovating commercial space, or covering seasonal cash flow droughts, a business loan is your best bet to help stabilize your business.
While banks are sceptical at times and have plenty of rules and regulations that a firm must meet, NFBCs can ease out financing for you in minutes.
The right amount of funds at the right time can break or make a business. You can easily apply for unsecured business loans at financial institutions like KNAB Finance who process loan applications faster, and have an easy and hassle-free procedure.