Expand Your Small Business This Diwali With a Loan For Business

Posted by Bhavna Singhal on October 4th, 2018

Diwali is just about two months away and every business is scaling up its operations to meet the growing demand of customers during this time of the year. But do you have enough funds to keep your business going without any glitches? Is your business really ‘Diwali-ready’? If your answer is no, then you should consider taking a business loan. A business loan can be used for multiple purposes such as the expansion of the business, purchase of machinery & equipment or providing fresh working capital.

There are various types of business loans available in the market today that can help you run your business successfully this Diwali. Here are the top 5 business loans that you must know before applying for the same:

1. Term loan: Terms loans are long-term in nature and often utilised for capital expenditure. You can use term loans to buy long-term assets like building, land, machinery, etc. The amount of loan offered is generally high and depending on the credit profile of the business, the rate of interest can be lower. They can range between 5 to 20 years and can have fixed or variable interest rates.

2. Working capital loan: This type of loan is taken when you don’t have enough cash to take care of the day to day operations of your company. The working capital loan is the best option to overcome the seasonal shortfall of cash, irregular cash flow or to cater to a sudden spurt in business. Working capital loans are available for a period of 6-12 months. It is sanctioned easily to finance your urgent needs and does not require any collateral.

3. Loan against securities: If you have invested in financial securities such as shares, mutual funds, insurance policies or exchange-traded funds, you can avail loan against these securities to meet your business needs. Tenure of such loans is renewed after every one year. However, only those shares, insurance policies, and mutual funds can be pledged to raise funds which are approved by the bank.

4. Equipment financing: These loans are predominantly for the purchase of machinery and equipment as they play an important role in the expansion of your business. The tenure for such loans are generally in the range of 4-5 years and the equipment is generally taken as a collateral, along with some additional security. Loans for equipment and office are also provided by banks.

5. Invoice financing: Invoice financing is also a powerful tool to raise capital. There is often a time lag between when a business raises an invoice and when it finally gets paid. In such a situation, you can approach a bank to apply for the loan against the invoice. Up to 80% of the invoice amount is given as a loan to you and the rest 15% is given when the customer pays the invoice in full. The lender will deduct fee and interest rate from this amount.

6. Pradhan Mantri Mudra Yojana: Pradhan Mantri MUDRA Yojana (PMMY) is a scheme specifically designed for the MSME industry in the non-farm sector. These loans are generally provided by commercial banks, NBFCs, cooperative banks, and small finance banks. The loans under this scheme is available under three products – Kishore, Shishu, and Tarun. Shishu generally covers loans up to Rs 50,000, Kishore covers between Rs. 50,000 to Rs. 5,00,000 and Tarun covers loans between Rs. 5,00,000 and up to Rs. 10,00,000

So, if you don’t have enough funds for your business, you can apply for a business loan. There are several banks and NBFCs in India that offer business loans at affordable interest rates. You can also compare interest rates and fee of various lenders through online aggregators, and apply for the one meeting all your requirements.