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What is a Business Loan?

By Finserv MARKETS - Jul 26,2019
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What is a Business Loan

Any business, big or small, requires funds for running its operations smoothly. Either the business owner(s) invest their own money in the business or try availing a business loan from a financial institution.

The need for extra financing usually arises when planning business growth and expansion. In such cases, a business loan is the most feasible option for any entrepreneur.

So, what is a business loan? A business loan is a kind of financing offered by banks, Non Banking Financial Companies (NBFCs) or other financial institutions to the companies in need. It is usually availed for financing the growth and expansion of a business.

Business Loan Types

There are many different types of business loans available in the market. However, these loan facilities fall under two major categories – Term Loans and Flexi Loans.

Depending on the tenure of the loan, term loans can either be short-term or long-term. The short-term loan will have a tenure of up to 5 years. Whereas, the long-term tenure can expand up to 20 years. In both the situations, you are liable to pay equal installments until the tenure ends.

In Flexi Loans, the lender often allows you to pay the interest amount as EMIs and the principal amount can be paid at the end of the tenure. Moreover, you have the flexibility of paying interest on the amount you have used and not on the entire loan amount.

Following are the different types of business loans available in the market.

1: Working Capital Loans

For the smooth functioning of business operations, every company needs a constant cash inflow. Lack of cash inflow can disrupt your business operations and can eventually lead to business failure. This is when you can avail a working capital loan.

Here, your lender will set a limit for the loan amount that you can avail. The loan amount needs to be utilized for a specific purpose (which is as working capital) and cannot be used in any other manner. Your lender will approve your loan application against a definite purpose and your business plan.

Some lenders also monitor the order book of your business with the debtors, receivables, cash flow, and inventory at different intervals of the loan tenure. If the set parameters and expectations are not met, your lender has the rights to revoke the loan.

Before approving your loan application, the lender will check your company’s financial health (in regular and well audited manner).

2: Business Loans for Women

Many lenders offer loans to women entrepreneurs to boost their business growth. With such a facility, women entrepreneurs can now manage their daily business activities efficiently and smoothly. Moreover, business loan for women is available at a much lower rate of interest compared to other business loans. This loan scheme is specially available in the market to encourage more women entrepreneurs and help them financially sustain their companies.

3: Machinery Loans

You cannot run your business with the same resources and equipment all its life. You have to upgrade your machinery and equipment to meet the ever-changing demands of the business world.

Upgrading to the latest technology and machinery requires a considerable amount of funding. Machinery loans are a kind of business loan that allows you to overcome your asset requirements.

4: SME and MSME Loans

A huge amount of funding is required in case you are planning to expand your business. You can have enough manpower and all the latest technology, but with insufficient funds, you cannot plan a business expansion.

With SME and MSME loans, entrepreneurs can increase their business reach and expand their operations. These loans also help in staffing, technological upgradation or any other marketing activities.

A Final Thought

You can avail all the above types of business loans by applying for Bajaj Finserv Business Loan on Finserv MARKETS. The loan application process is simple, quick and hassle-free. In fact, you can avail business loan benefits ranging from features like low EMI, minimal documentation and much more. With Bajaj Finserv Business Loan from Finserv MARKETS, your loan application is approved within minutes and the loan amount is credited in your bank account within 24 hours!

What else do you want? Apply for Bajaj Finserv 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