December 5, 2022

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Stepwise guide to avail the benefits of small business loan

small business loans

Whichever segment your business belongs to, money will always remain an essential element. Any company that is scaling up or expanding its services will need to arrange finances for its smooth expansion. Many small businesses today fulfil their financial requirements by opting for a business loan. Considering the current scenario, small business loans are the best options that help your business get going. Furthermore, business loans are availed to meet the following business requirements; Business expansion, Purchasing of plant and machinery, Maintaining inventory, Starting a business line, Meeting working capital needs. 

Availing a small business loan in India today is much more comfortable than ever before. Several lenders in the market are competing to get the attention of borrowers. Before narrowing down the options, the applicants must learn everything about small business financing. 

Before applying for a loan, you need to be sure of the purpose of borrowing funds. The reason you need to avail finances will determine the type of credit facility. Here are some categories of small business loan types: 


This works like a credit card for your small business. Under this credit facility, the financier issues a pool of funds for your business. Depending on your business requirements, you can withdraw the funds. The interest would only be levied on the money withdrawn. 


In a merchant cash advance facility, a lender advances company money in return for a part of future sales on the credit card. After receiving a merchant cash advance, the lender withdraws daily payments from the business’ bank account. 


This loan intends to meet the everyday demands of your business. These are short-term loans that cover the operating cycle gap. This facility can be used for financing offline as well as online businesses. The working capital loans are appropriate options for the business that face the short term cash flow problems. 

There are various benefits of availing small business loans in India. The funds profited from small business loans are an additional source that can be used by the business wherever required. 


You can choose from various types of credit facilities to fulfil your specific business requirements. Various government schemes such as CGTMSE and other similar schemes offer business loans that are structured for MSEs for starting, expanding, or upgrading. Government schemes do not require any security or third-party guarantee.


The flexible nature of small business loans reflects in their repayment structure. Lenders offer such flexibility because they understand the complexities involved with businesses. They may offer a repayment tenure as per the cash flow to avoid the difficulties in financial management. 


To enhance the growth of small businesses, the rate of interest charged is lower. Rates of interest are not determined based on the loan amount. Several factors are considered, such as tenure of the loan, viability of the business model, the financial condition of the company, and the credit history of the borrower. Other costs, such as processing fees, are minimal and are one-time expenses. 


Lending institutions offer small business loans without any collateral. This makes it easy for small businessmen to avail of such loans. EMI calculators and online applications provided by lenders on their websites have made the process much more comfortable. 


The required cash flow is essential for expanding the business. Besides, owners also have the freedom to use the finances as per their requirements. It enables them to use the funds according to the demands of the business. 


According to the sections of the Income Tax Act that state the part of profit used for repaying the loan is exempted from the tax. 


Businesses require funds at various phases such as while establishing a new project, expanding operations, or repaying old debts. However, establishing a business is the phase when funding seems to be essential. Business owners have to make optimal use of their resources in every possible way. But however, that is not enough. Out of the several options available for financing your business, and one of the suitable ones is a small business loan.