Demonetization, its Advantages & Points to Note
Everyone in India and abroad was surprised by the government's announcement to replace existing currency notes of Rs. 500 and Rs.1,000, which accounts for alm . . .
A business is all about making quick decisions and being ready to grab any opportunity that comes your way. When a business is struggling and having a hard time, a quick cash injection can work wonders to turn things around. There are a lot of options available these days, from which an entrepreneur can choose and get the much-needed and quick cash for investing in the business. These financial solutions can ensure a fast recovery of the business or help an entrepreneur to take up exciting new projects.
Types of Business Loans
1. Bank ODs
The simplest way to get a credit from a bank is by opting for the overdraft facility, for which, a specific approval in terms of usage limit is already taken in advance. It is a kind of loan which needs to be repaid with a certain amount of interest. With a bank OD, you can spend more than the amount in your account. Depending upon your credit-worthiness, the limit of OD is fixed, and by paying certain fees and interest charges, one can use this facility.
2. Business credit card
A business credit card is a flexible and open-ended line of credit that needs to be paid in full within a month. With this credit option, users have to pay a minimum amount within the month, and on the balance amount, an interest is charged. A credit card can be used for planned purchases, if you can make repayments on time to avoid high charges.
3. Business line of credit
Another flexible loan option that is useful for small businesses is a business line of credit. It is easy to get and use. The bank charges interest only for the money withdrawn from the loan account up to a certain limit sanctioned.
4. Business Loans from financial institutions
For long-term requirements, it is advisable to take business loans from financial institutions, if your credit score is satisfactory. A loan requires you to make regular and timely repayments, while the funds can be invested in the business. They help in maximising the EPS (Earnings per Share) from the EBIT (Earnings before Interest and Taxes).
Tip to Get a Quick Business Loan
1. Keep accounts up-to-date
Regularly updating books of accounts is essential for maintaining healthy financials. It is advisable to hire an accountant or advisor who can correctly forecast cash flows and keep a check on them to prevent the working capital from going into the red zone. While applying for a quick loan, having accounts updated and cash flows already forecasted may help you to get a faster approval.
2. Focus on improving credit score
By making loan repayments on time and cutting down on unnecessary loans, you can improve the credit score of your business. A good credit score can help by getting loans approved quickly when your business desperately needs funding.
3. Invoice financing
Managing accounts payable while keeping an eye on the sales and revenues requires skills and tactics. However, in case your business has a lot of unpaid invoices, you can use those invoices as “invoice factoring” and avail quick loans from lenders.
Every business undergoes difficulties throughout its lifetime. However, a cash injection at the right time can ensure quick recoveries and better growth. Whenever you are facing a cash shortage due to recession or stuck accounts receivables, a handy business loan via any mode can keep the business going without hampering its operations.
While running a business, seasonal slumps can be dealt with a line of credit or a loan, until the business starts flourishing again. So, rather than worrying about making salary payments to your employees during off-seasons, you can focus on improving operations and expanding your business through small-term loans, ODs, or other forms of credit. Keep your books of accounts updated and credit score good to get the financing you need easily.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.