What are the benefits of a business loan? How will they help your business grow? Business loans offer a quick, hassle-free, and convenient way of financing for SMEs and MSMEs.
Setting up a business and running it requires investment. Your dream to start a venture or expand your existing business should not be curtailed due to a lack of funds. A business loan offered by almost all banks and NBFCs can help you in turning your plans into reality.
Business loans are funds offered by financial institutions to a business to meet its day-to-day requirements. There are numerous benefits of taking business loans; these loans can ease your financing woes.
Benefits of Taking Business Loans
Business loans are a product carefully designed according to the needs of business owners. These loans offer a wide range of advantages for business owners.
No Interference of Lenders
When you get business finance from a bank, there is no interference from them in dictating how you run your business or use the money. The NBFC or the bank is just bothered about getting their money bank on time. You can use the loan for equipment purchase or buying raw material as per your requirements. However, if you choose to get funds from an equity investor, they would like to control how you use the funds or run your business. Non-interference from lenders is one of the chief benefits of small business loans.
Ease of Access
Lenders in current times have made the lending process very smooth and hassle-free. You can approach a lender and explore the possibility of taking a loan. No lengthy discussions are required, unlike when you look for an investor for funding.
Getting small business expansion loans is also convenient as most lenders have simple documentation and eligibility requirements. Almost all banks and NBFCs offer finance for a business; you have many lenders to choose from where you can borrow.
Shriram Finance Business Loans are available for micro, small and medium enterprises unable to obtain funds from banks or other financial institutions.
One of the benefits of taking business loans is that these loans are available at competitive rates. The interest rate ranges from 15% to 25%, depending on the bank's policies. The interest charged may also depend on other factors like the amount you require, your credit rating, etc.
The interest charged on business loans is much lower than other available options of financing. The intense competition among lenders also gives you more choice and negotiating power to get the most competitive rate for your loan.
Small business expansion loans are available at very affordable rates under special schemes to encourage small businesses to expand and consolidate their operations.
Sometimes you may require funds quickly for your business needs; quick disbursal of loans is an added advantage of a business loan. With the option to apply online and minimal documentation required, loan disbursal happens within a couple of days. Some lenders may also offer instant business loans for a preferred category of customers and a loan amount up to a fixed limit. Your business activity will not have to suffer a break due to a lack of funds.
You Do Not Have to Share Profits
You have worked hard to set up your business and would not like to share your profits with anyone. However, if you get funds from an investor, you will have to share profits with them.
This is one of the benefits of small business loans that make them popular amongst business owners with a small setup. You can retain all your profits; you have to pay the principal and the interest to the lender on time as per the loan terms.
Taking loans to grow a business offers a tax advantage too. As per the Income Tax Act, 1961, you can claim a deduction on the interest that you pay on your business loan. The interest that you pay is deducted from the gross income. This deduction helps in reducing the total tax burden. You must maintain a proper record of your loan. The tax authorities may ask you to submit the proof in some cases. The principal repayment is not tax-deductible.
Strengthens Your Credit Rating
One of the benefits of business loans is, they can help in improving your credit rating. Your credit score depends on your repayment history and other factors. Your payment history contributes 35% to your overall credit score. Repaying your dues on time can help you get a good credit score. A good credit score allows you to access credit at more favorable terms.
Shriram Finance provides loans to grow business even if you do not have a good credit score. If you pay all your installments on time and be a responsible borrower, your credit score will improve. A good rating will make it easy for you to get a loan in the future.
Most lenders offer collateral-free business loans if you meet the eligibility criteria laid down by the lender. Since no collateral is required, a large number of people can have access to these loans.
Lenders allow you to borrow for the duration as per your requirements. If you take a loan for equipment purchase, then you might choose a longer-term to repay. If you borrow funds to pay your staff, then you can repay your dues in a shorter duration.
Shriram Finance Business Loans are available for a duration ranging from 12 months to 60 months. If you face some interim financial problems, you can get funds to get your business back on track.
Business Loans Help Power Your Business Growth
Another of the benefits of taking business loans is that they help you grow your business. Your ambition to expand your business will not get hampered due to a lack of funds. Often business owners may not have sufficient funds to invest in their business which may stop them from hiring more people or employing new technology.
Lenders offer a whole range of options like instant business loans, collateral-free business loans at competitive rates, and flexible repayment terms to meet your requirements. You can choose to borrow from a lender who offers loans on terms most suited to you.
Whether you are looking for small business loans or finance for a medium-sized business, you can access funds with minimal documentation and in quick turnaround time so that you do not lose a lucrative opportunity due to a lack of finance. You can use the funds to upgrade technology, open a new office or hire new staff.
You should apply for small business expansion loans after carefully analyzing your needs and also your repayment capacity. If you borrow less than what you need, then your expansion plans will be affected adversely. On the other hand, if you borrow more than what you need, you will be paying extra interest. The higher interest cost will reduce your profits; high debt also impacts your creditworthiness adversely.
We have discussed the benefits of taking business loans above. When you borrow, keep your requirements in mind and choose a lender who offers the most favorable terms and conditions. Never forget to compare lenders or read the fine print. Shriram Finance offers you customized solutions whether you are an MSME, hotelier, or a professional looking for funds. You can check the options available at their website and apply online for hassle-free financing.