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A Quick Guide To Business Loans And Some Of Its Types

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Have you planned on setting up a business but have been procrastinating due to a cash crunch? Or is the lack of finance a stumbling block in expanding your existing business? If your answer to all of the above questions is yes, then it’s high time you consider opting for quick loans for business.

Entrepreneurs often require capital to finance the initial business expenses or fund their day-to-day expenditure of the existing business. You can borrow cash from friends, family, or others who may offer financial help, but that comes with impediments. First, your chances of getting the required amount are low, or you may not get regular funding. Then banks and non-banking financial institutions provide small, medium, and large businesses with business loans.

A business loan is a capital borrowed by an individual or an organization to fund business needs such as buying land or leasing a factory, purchasing new equipment, running daily business affairs, or paying salaries to the employees. Financial institutions, including banks and non-banking financial institutions, accommodate these enterprises’ financial needs based on their business potential and requirements. Business online loans are a secured funding option to help jump-start a new venture, expand and diversify the existing business or meet daily expenses.

Depending on your business requirements, financial organizations offer different business loans. Some are as follows:

  1. Start-up loan

A start-up loan is for start-ups or new businesses that may not have a unique credit history. The borrower’s credit, the current turnover, etc., are considered while deciding the loan amount, tenure, or interest rate. Businesses must prove their existence by submitting their registration number.

  1. Working capital loan

It falls under small business loans and helps fund an enterprise’s everyday operations. Manufacturers, traders, wholesalers, service providers, and retailers apply for working capital loans.

  1. Loan against property for SME

Small and medium businesses can apply for this type of secured loan. In addition, the applicant can submit a litigation-free residential or commercial property as collateral for the loan.

  1. Equipment loan

Also known as a machinery loan, it funds the purchasing of equipment for the manufacturing unit of a business and offers an affordable interest rate. It is pretty discreet; the equipment approved by the fund also counts as collateral and other assets.

  1. Invoice financing

In the case of small businesses incurring/having to incur expenditures on behalf of their clients, they submit an invoice to the concerned client for reimbursement/funding. There is, however, a time lag between when an invoice gets raised and when the client pays it. Invoice financing helps these small businesses sail through this time lag by providing up to 80% of the invoice amount.

  1. Business loans for women

These are meant for small and medium-sized businesses run by women entrepreneurs.

  1. Merchant cash advance

A portion of the everyday debit card sales determines the loan amount.

  1. Overdraft

Essentially, an overdraft is a facility where funds are approved against a mortgage, usually a fixed deposit held by the borrower. A fixed overdraft limit is authorized depending on the borrower’s relationship with the institute, credit history, repayment history, business cash flow, etc.

  1. Business credit card

A business credit card is ideal for a business owner who needs immediate cash and simultaneously adds to their credit score.

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