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 . . .
From running a business smoothly to planning further expansion, it requires funds. Business owners also have to make sure that they make the right strategic moves to stay at the top of the game but sometimes, they may not have enough funds to execute their plans. To help business owners in such situations, financial institutions offer Business Loans, which are designed to meet the financial needs of entrepreneurs and businesspersons. While there are different types of secured and unsecured loans available, here are some reasons why business loans are the best match for financial needs of your business and where all you can use it to boost revenue.
Advantages of Business Loan
Higher Loan Amounts:
Lenders understand the huge financial needs of business owners and therefore, business loans are designed with higher borrowing limit, something the personal loans will not provide. Moreover, business loans keep your business and personal finances separate and do not put any liability on your personal assets.
There are different types of business loans available according to the need of the business. The business owner also has the option of choosing the tenure of the loan. If you want to take a business loan to manage working capital, you can go for a shorter period but if you have expansion plans, a business loan with a longer tenure would serve better.
Build Financial Credibility:
Opting for a business loan helps build the financial credibility of your company, which is difficult if you opt for a personal loan as the latter does not affect the business credit score. Moreover, when lenders see a business owner investing in the growth of the company, it helps in building the reputation of the company as a growth-oriented one. Financial credibility opens doors for other and bigger opportunities. Moreover, when the loan amount repaid, it builds the business creditworthiness of the company.
What Purposes a Business Loan Can Help You Fulfil?
A business owner thinks of expanding operations when the company is making decent profits and its future prospects look quite promising. Therefore, if you want to open another branch in another city, or upgrade the existing infrastructure to lead your company to the next chapter of growth, business loans will help you buy office space to expand your operations. With right planning and execution, the revenue you will earn from scaling up your operations would be much more than the interest amount you would pay for a business loan.
Buy Equipment or Inventory:
With technology, machines that are more sophisticated are being created that are lowering manufacturing cost while increasing productivity. It is a solid investment to stay ahead of the competition. You can apply for a business loan to purchase new equipment and replace the old and worn out ones.
Fulfil a Large Order:
You would require additional funds if you suddenly get a large order. No business owner would want to let go an opportunity to produce something at a large scale and earn not just more revenue, but also a loyal customer. However, taking a large order means you have to ramp up production by buying more raw material and hiring more workers to meet the deadline. All this would need a handsome amount of money, which you can get via a business loan.
Invest in Human Resource:
As a company grows, it becomes important to hire more staff. Hiring a healthy number of quality professionals, who can increase the output with existing infrastructure, requires a significant monetary investment. If your current revenue is not proving to be sufficient to increase manpower in your business, you can opt for a business loan.
Gain Working Capital:
Every enterprise needs sufficient capital to keep running the daily operations. But the cash flow does not always stay steady and accumulative cost of paying for rent and taxes, purchasing inventory, clearing payment to suppliers, giving salary to staff becomes too big an expense to be paid from savings. A business owner relies on healthy cash flow to be able to pay these expenses and maintain continuity of operations. But when the cash flow is irregular due to a lean phase or delayed invoice clearance, one can use business loans to deal with such temporary financial situations.
Build Credit Score:
On successful repayment of your business loan, you will see your business credit score rise significantly. This improved credit profile will give you a reputation of a trustworthy borrower and will make you eligible for higher loan amounts at better terms and conditions.
Lenders, today, understand the ambitions of new-age business owners and realise their potential for growth. Therefore, from application to documentation and verification, the process of getting a business loan has got easier and quicker. With so many options available, experts suggest that business owners do some research, evaluate their requirement, check the eligibility criteria, and apply for a suitable loan that can be most advantageous to their business.
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.