Every business requires financing to grow. How to get a business loan is a major concern for many small and big business. Let’s find its solution here.
Business growth and funding go hand in hand. Every business has assets and liabilities. Many however face issues with working capital. The purpose of business loan for new business may be different from a business loan for an established one. But the key is to get the best financing option which matches your business requirements. We present a comprehensive guide to 10 business financing options.
- Family and Friends: The first option for many business owners is to borrow funds from family and friends. This could be a very easy option as the repayment terms are highly flexible. And depending upon the situation, you might not even have to pay any interest over the borrowed amount. However, in the case of repayment going slow, it could be potentially stressful and may ruin the relations. Also, family and friends may not understand the lean patch in business.
- Â Local lenders
Loans for business in India also revolve outside banks and other financial institutions. Local lenders provide you with money at higher interest rates which can turn ugly and make for loss in business. They also don’t understand the lean patches in business and are often rude. They want their money back and are not too considerate.  - Traditional lenders
Traditional lenders are better than local lenders as they don’t charge a whopping interest rate. The loans given by them are of two types-secured business loans and unsecured business loans. Many new business loans are offered by these traditional lenders but the application process is lengthy and may require many meetings in person before the loan approval.
4.Secured business loans from traditional lenders
Secured business loans from traditional lenders are provided with collateral security. The collateral could be any valuable asset like property, car, home, inventory, equipment or anything which can be liquidated. The main purpose behind is to cover the risk of the lender in case the borrower defaults and fails to pay back the loan amount. The secured business loans have lesser interest rate and are usually given for longer tenure.
5. Unsecured business loans from traditional lenders
Unsecured business loans, on the other hand, do not require any collateral but are given for a shorter duration of time. To counter the risk, the rate of interest is higher. However, there is the flexibility of repayment in these business loans.
6. Unsecured loans by digital lenders
Digital lenders like Indifi are also offering unsecured loans without any collateral. They are flexible in repayment and the rate of interest and are usually approved very quickly. The processing and documentation are also not cumbersome. The business loans by digital lenders give you comfort to fill the application form online. The entire approval process takes less than 24 hours itself.
7.Merchant Cash Advance
Merchant Cash Advance is a leading type of unsecured business loan offered by the top digital lenders like Indifi. Under Merchant Cash Advance, a business can get access to business loans on the basis of their transactions against the card swipe machine and payment wallets. Even the repayments are connected to transactions, which effectively means the business need not worry about the regular instalments, as the repayment is completely aligned with the business.
8.Unsecured Line of Credit
Traditionally the lenders needed collaterals for issuing a Line of Credit. However, with the digital lenders like Indifi, one can get access to unsecured Line of Credit based upon their business transactions. The Unsecured Line of Credit can then be used to acquire new customers, manage working capital or run a business during the low revenue season. One can utilize the amount repeatedly and pay once they get their money from customers.
9.Invoice discounting:
If you are a small company and do business with large corporates, often the funds get held up as the large corporates have their own payment cycles. In such a scenario Invoice Discounting helps the small companies to get access to funds based upon the invoices raised to the large corporates. All one needs is to submit their invoices to top Digital Lenders like Indifi, who then provide up to 90% of invoice value as instant funds which can be paid back as the company gets money from their clients. One only pays for the amount and number of days the amount is utilized.
10.Short term loans: Short term business loans are provided for a shorter duration to meet the immediate funding needs of the borrowers. The funds can be used to buy goods in bulk from the distributors and companies to earn more margins, the funds help them to manage working capital while consumers eventually buy that stock.