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Business Loans VS Private Investors: Choose the Right One for Your Business

By Finserv MARKETS - Jun 4,2019
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Business Loans VS Private Investors

Starting a business always requires funds, whether the business is small, medium or big. Most start-ups are constantly on the look-out for funding. Some opt for private investors and venture capitalists while the rest go for business loans from banks or Non-Banking Financial Company (NBFC). What you finally opt for is ultimately your choice but we have curated a list of pros and cons for each, helping you in deciding better.

Business Loans

Business loans are taken from established financial institutions like banks and NBFCs. The money taken from these institutions normally require a security to be pledged and are repaid in EMIs. Just like Bajaj Finserv Business Loan available at Finserv MARKETS

Pros

Some of the benefits of business loan includes, borrowing money from banks allows you to keep the profit with yourself, banks or NBFCs do not give a loan on profit-sharing basis. All they need is the assurance of repayment. The interest charged on the business loan is also not exorbitant.

Private investors are constantly keeping an eye on your growth. Apart from business pressures, there is pressure to keep them satisfied as well. NBFCs or banks have no such requirements.

Bank rates are standardized and equal for all. There is no requirement of bargaining as you can always opt for a bank that comes closest to your needs.

Cons

Banks do not approve a big loan amount at the very go. They see a risk factor in approving a loan for a big loan amount in the first go itself.

Business loans normally ask for some asset to be pledged. With new business, the stakes are also higher. So, lenders urge you to provide a collateral against the loan amount.

Private Investors

In private investment usually the money is taken from Venture Capitalists and Personal Investors to start or run the business. Private investors do not ask for any collateral to be pledged and normally work on profit sharing basis.

Pros

Private investors show more faith in new business models and do not restrict themselves when investing funds. A private investor does not ask for any collateral or security to be pledged against the loan given. Raising money through private investors is more affordable than through business loans.

Cons

Since private investors do not ask for any collateral they do ask for the profit to be shared. The profit sharing margin could be huge and that may affect your percentage.

Additionally, there is a legal expense attached to taking money from private investors. A lawyer will be needed to carefully draft all documents and advice you, should something go wrong.

Private Investors or NBFCs the final decision lies with the borrower. But the money should always be taken from a source that benefits the borrower and the interest of the business in the long run. You can apply for a Bajaj Finserv Business Loan available on Finserv MARKETS at the most competitive interest rates. Flexible repayment options, hassle-free online application process has made Finserv MARKETS the most preferred destination for business loans today. What’s more? Your business loan can be approved under just 3 minutes and the loan amount can be credited to your bank account within 24 hours! So why wait? Apply for a small business loan with us, today!

Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522