Why Should You Consider a Business Loan for Your Growing Business?

Doing business in India is an enchanting yet hard journey. Even though there are high possibilities for growth, scaling up often requires huge financial investments. That is where business loans come into play. A business loan is what you need if you want to upgrade equipment, expand operations or manage working capital for your business to grow.

Below is a detailed analysis of why opting for a loan might be a wise decision for your growing enterprise within an Indian context.

How can a business loan help grow your business?

#1. Immediate financing options

One of the major benefits of taking a loan for your business is that it offers immediate access to funds.

This is crucial to Indian businesses, which are usually affected by seasonality in terms of demand, like retailers during festive seasons or manufacturers experiencing peaks in production.

The availability of financial resources allows you, as an entrepreneur, to seize opportunities without using your savings.

#2. Range of loan alternatives

The financial institutions in India provide different types of loans according to specific requirements.

Depending on the nature of your business, you can either go for term loans (to purchase fixed assets) or working capital loans (to take care of day-to-day expenses).

#3. Create your company’s credit reputation in a positive light

On-time repayment is not only beneficial to your organization but also builds its credit reputation.

This will facilitate support for low interest rates and higher amounts the next time you need a loan.

Key advantages of applying for a business loan in India

#1. Competitive Interest Rates

In India, there is a well-regulated banking sector that ensures that borrowers receive competitive interest rates.

Public sector banks, private sector banks, and NBFCs (Non-Banking Financial Companies) offer business loans at different interest rates based on the customer’s credit score and ability to repay the loan.

It makes borrowing affordable for many Small and Medium Enterprises (SMEs) since interest rates range from 7% to 24% p.a. on an average basis.

#2. Flexible loan repayment terms

Lenders in India offer unsecured loans with flexible repayment tenures ranging from 12 months up to 5 years.

One would want their EMIs to align with the business cash flow.

For instance, if your business experiences seasonal highs and lows, you might opt for a payment plan that follows such cycles.

#3. Small enterprises without any collateral can secure loans

Many Indian lenders offer unsecured loans these days under various schemes like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) plan by the government.

This decreases risk for small business owners, thereby fostering entrepreneurship.

When to Use Business Funding

Reasons companies take credit to expand:

• The build-out of new premises requires loans that help fund high property price tags. Also, they cover renovations when starting an additional location or upgrading an existing one.
• Procuring equipment or machinery that will be used in the production process. Hence, costs incurred through hiring services for such purposes are reduced.
• Human capital addition increases as corporations grow, and so should their personnel base to sustain the development momentum. This can be achieved by taking a business loan that can cater for recruitment and training expenses.
• Inventory management can also become easier through funds. It can be used to stock up on raw materials ahead of a busy season with the help of enough money meant for this purpose.
• Marketing and branding, with the digital shift happening in India, requires business owners to set aside some money for online marketing campaigns. This may involve advertising online, website design and development, and social media platforms used by people who form part of their target market.

Simplify Loan Planning with an APR Calculator

Before securing a business loan, it is important to know how much money you’ll end up paying back, including both capital and interest. This is where an APR calculator comes in handy.

• APR stands for Annual Percentage Rate, which not only includes the interest but also includes processing fees and other charges associated with taking out a loan.
• Using an APR calculator allows you to compare different loan offers and determine the most cost-effective option.
• For instance, when a lender offers you a 10% interest rate but also has a processing fee of 2%, knowing the APR helps give a clearer picture of how much the loan really costs.

Indian government initiatives to support domestic businesses

A number of initiatives have been launched by the Indian government through which it will be possible for small businesses to access credit more easily:

#1. MUDRA Loans under the Pradhan Mantri MUDRA Yojana

The MUDRA Yojana provides financial support to micro-enterprises with loan amounts ranging between ₹50,000 and up to ₹10 lakhs.

#2. The Stand-Up India Scheme

This focuses on empowering women and SC/ST individuals to pursue entrepreneurship by giving them a maximum loan limit of one crore rupees.

#3. The Emergency Credit Line Guarantee Scheme

This scheme was introduced during the COVID-19 pandemic period in May 2020 in order to help MSMEs recover through a guaranteed loan facility.

Things to Think of Before Making an Application for Business Loan

1. Estimate how much money you require: Try only borrowing an amount that is necessary to prevent paying extra interest charges.
2. Go through the requirements: Different banks have varied conditions for qualification like minimum turnover requirement or years in operation in addition to other aspects.
3. Check for lower annual percentage rates: The best way to compare the cost of borrowing money is through online tools such as an annual percentage rate (APR) calculator.
4. Avail documents well in advance: Usually, banks ask for IT returns, balance sheets, and KYC documents.
5. Plan for regular payments accordingly: Your business ought to generate sufficient cash flow to meet its EMI obligations without any difficulties.

The Bottom Line

Such financial support can help an Indian enterprise achieve its goals without risking its financial stability, hence acting as an accelerator for development over time. Various government schemes have been put in place, including, but not limited to, competitive interest rates. This attracts many people to take out loans, now offered based on individual needs.

If you would like to expand your business, scale up using loans that suit you best, depending on what really fits into your pocket. Use an APR calculator before choosing a financing option. This will enable you to save huge amounts. Strive towards realizing those dreams by investing in them today!