Small business loans are a perfect funding option for startups and medium-scale organizations to fulfill different requirements. If you are looking forward to reorganizing your business or simply want to boost your capital, these are the best baits. These loans are helpful compared to investment funds as you can gain them with easy terms and conditions without losing any control of your business. Moreover, you can utilize them for multiple requirements like working capital needs, or to renovate your business structure, employing new staff, or market acquisitions. Nowadays these loans are extended to various women entrepreneurs as well which is a welcoming initiative on the part of the government. Let us have a detailed discussion on these loans.
Types of small business loans
Often small business entrepreneurs require funds to carry out their day-to-day functioning of business in the nascent stage of their business. So, they should have proper knowledge of what types of loans will suit their requirements as there are several forms of small business loans that exist in the country. If you are looking for a small business loan in Coimbatore, you can choose from the following types of loans.
- Credit line facility
As a business owner, you can receive this credit line from various online lending companies or financial organizations. This facility allows you to withdraw money from your business account till the sanctioned limit. The benefit of this credit line is that you can withdraw money even if your actual balance account is low. The additional amount you will borrow will need to be repaid along with interest in your account.
- Short-term business loan
This type of loan is offered in small amounts. You will get it below 1 lakh. The repayment tenor is also less with this loan though you will get sufficient time between 3 to 18 months to pay back the amount. Mostly this loan is taken to fulfill working capital needs or for any limited investment reasons.
- Trade creditor
This type of loan can be called an agreement between the supplier and the business owner. When a business owner cannot pay back the supplier in exchange for the raw materials and goods supplied to him it is called a trade creditor. Mostly small-scale business owners indulge in this type of loan. The business owner makes the repayment when they have the availability of funds. The business world is run on trust and this type of loan reflects this behavior.
- Equipment Finance
This is a type of start-up loan to cater to the cash flow and working capital requirements of small businesses. This is a popular type of loan where the business owner offers the tools and machinery from his factory to guarantee the loan. The lending organization gets the right to confiscate them in case of any default payment.
- Invoice financing
This type of loan is also popular among small businesses whereby you as a business owner would sell your invoices to a third-party lender in exchange for the value of those invoices. Often delays in payments compel businesses to resort to this practice. However, this loan covers up to 70 to 90 percent of the financing of the invoices, not the whole amount.
- Government loans
The government has designed some small business loans to encourage startups and various other small business owners in the country. These loans help small businesses to realize their business objectives and true potential. These loans are created for seniors, women, and the minority category of people to run their ventures.
Advantages
- With a small business loan, there is no hurdle of giving up some control of your company to the lender which is usually noticed with investment capital. You can retain your company rights by borrowing money with a small business loan and as soon as you repay the amount on time to the lender you have no business left.
- A small business loan provides you with instant cash. With a conventional business loan, it takes time to receive the loan amount as the processing time is longer. This is extremely useful for those who run seasonal businesses which implies you enjoy revenue only at some selected time of the year. The time when you have no revenue can rely upon small business loans to manage the cash flow.
- You can get these loans at a reasonable interest rate as a lot of lending organizations have come forward to offer these loans so there is tough competition going on among them.
- You can enjoy tax benefits by taking these loans according to the income tax act. You can get a considerable tax deduction on your loan. However, some terms and conditions apply here and you must qualify them.
Wrap up:
If you are not able to decide whether you should take a small business loan or not reading this blog may change your mind. With small business loans, you can enjoy the advantage of a range of loans customized according to your requirements. Whether you are applying for a small business loan in Coimbatore or any other location these loans will remain the same. If you are in urgent need of cash to finance your small businesses, get proper information about these loans and find a good lender who offers them at the best interest rate and comfortable repayment duration.
