Businesses of all sizes and types require financial support to grow, manage operations, and handle contingencies. Many financial institutions now offer business loans online, allowing entrepreneurs to secure funds without extensive paperwork or delays. Here are the main types of business loans available online in India:
1. Term Loans
Term loans are among the most popular types of business loans. These are offered for a fixed period, ranging from 1 to 10 years. Borrowers can use these loans for various business needs like expansion, buying equipment, or upgrading technology. They come with fixed or floating interest rates and require repayment through regular EMIs (Equated Monthly Installments).
2. Working Capital Loans
Working capital loans are designed to help businesses meet their day-to-day operational expenses, such as payroll, rent, and inventory purchases. These loans are crucial for companies that experience seasonal fluctuations in cash flow. Typically, working capital loans are short-term and repaid within a year.
3. Business Line of Credit
A business line of credit is a flexible financing option where companies can withdraw funds as needed, up to a predetermined credit limit. It works like a credit card, with interest charged only on the amount withdrawn. This is ideal for businesses that need ongoing access to funds for emergencies or short-term needs.
4. Invoice Financing
Invoice financing, also known as bill discounting, is a loan type where businesses can borrow money against their unpaid invoices. It helps maintain cash flow when customers delay payments. Lenders provide an advance based on the invoice amount, and the balance is settled once the customer pays.
5. Equipment Financing
Businesses needing to purchase machinery or equipment can opt for equipment financing. This loan is secured by the equipment being purchased, and lenders often offer up to 90% of the cost as the loan amount. Equipment financing is popular in manufacturing and construction sectors.
6. Merchant Cash Advance (MCA)
Merchant cash advance is a form of funding available to businesses that rely heavily on daily sales transactions, such as retail stores and restaurants. In this case, a lump sum is provided upfront, and the repayment is made by deducting a percentage of daily credit or debit card sales.
7. Startup Loans
Startups in India can apply for specialized startup loans that provide initial funding for new ventures. These loans are typically offered by government initiatives like the Pradhan Mantri Mudra Yojana (PMMY) and are aimed at fostering entrepreneurship.
8. Overdraft Facility
An overdraft facility allows businesses to withdraw more than the available balance in their current account, up to a set limit. This facility is useful for short-term needs and is secured against collateral, such as fixed deposits or property.
Conclusion
Types of business loan in India have simplified the process of obtaining financing for businesses in India. From term loans to working capital loans, invoice financing, and more, there is a wide range of options tailored to different business needs. These loans provide entrepreneurs with the flexibility and convenience they need to manage and grow their enterprises.
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