Your business is now at a stage where expansion opportunities look very bright, but ploughing through your company's profits probably will not make up for the funds needed. What do you do? Well, that's when you explore the advantages of taking a business loan. Businesses usually require huge sums of money for starting up, expanding, or going forward with a particular venture. So very simply put, a business loan is a debt you take for any business purpose. Understanding concepts like Loan Amortization helps you better plan the repayment structure and manage long-term financial commitments.
To qualify for a business loan, lenders usually consider credit score, financial statements and working industry as prime factors. Why these are needed -
The documents required for a business loan typically include -
1. Principal Amount- The principal is the amount borrowed, which then determines the rest of the loan components. For example, A borrows Rs 50 lakhs for expanding his business to another city. A’s principal is Rs 50 lakhs and the interest starts getting charged on the same.
2. Rate of Interest- The interest rate is basically the cost of borrowing, paid apart from the principal and is usually expressed as a percentage of the principal.
3. Tenure- The total period from the date of the first disbursement till the date you pay back the last instalment.
4. Foreclosure- A legal process adopted by the lender in the event of non-repayment by the borrower that involves selling the collateral off to recover the money.
5. Fee
Business loan terms have it, you can use the provided funds for various purposes, such as expansion, working capital, equipment purchase, and others. As these loans can be obtained from financial institutions, the borrower can apply for the same by meeting the requirements. And this includes - business plan and a creditworthy profile. If you qualify for the repayment capacity of the lender, they approve the loan. Later you can repay the loan over a specific period, along with the interest and any fees associated with it.
The definition of Business loans answers your question - a loan that is specifically taken for business purposes. This is why the lender checks your business plan to see where you’ll be investing the loan money. You can use it for various purposes, such as funding start-ups, expanding an existing business, purchasing inventory, equipment, or real estate, managing cash flow, or consolidating debt.
Business loans offer several advantages, such as easy access to funds, flexible repayment terms, lower interest rates, and tax benefits. With the information on business loans, companies can obtain the necessary funds and grow/expand without relying on their coming profits. With a suitable tenure businesses can lower EMIs while managing their expenditures.
What is a business loan in India and which types are available to the borrower? All these are answered. Now, you must reach to the next step and identify suitable lenders that offer business loans. The borrower must start with the following steps -
The borrower usually has to make instalments consisting of the principal and the interest to pay the lender back. An amortization schedule displays how the entire loan will be repaid. It is a table of periodic loan instalments till the end of the loan tenure.
So, these were the key components that everyone seeking a business loan needs to know about. It's important for you to do thorough research on the different loans available in the market along with an assessment of the company's current and future financial position before plunging in for the loan. We hope the above details are enough to understand which loan you should take for your business. If you still have more questions about loans, please leave your question in the comment section below and we will get right back to you.
The amount of business loan you can get depends on - revenue, and collateral.
To improve your chances of getting a business loan, show a good credit score, prepare a solid business plan, and have collateral to offer.
You can use a business loan for various purposes like expanding your business, purchasing inventory, hiring employees, or investing in equipment or technology.
Hero Fincorp offers a wide range of financial products including Personal Loans for personal needs, Business Loans to support business growth, Used Car Loans for purchasing pre-owned vehicles, Two-Wheeler Loans for bike financing, and Loan Against Property for leveraging real estate assets. We provide tailored solutions with quick processing, minimal paperwork, and flexible repayment options for smooth and convenient borrowing experience.