The Business loan is the loan which is usually availed for financing diverse business needs such as an expansion of business, purchase of inventory, for buying equipment and machinery etc. The Business loan is of two type: secured and unsecured business loan. In the secured business loan, your property is to be mortgaged to apply for a loan. On the other hand, the unsecured loans are collateral free loans and there is no need to mortgage your property. As unsecured business loan does not require any collateral, the business loan interest rate for an unsecured loan is higher as compared to the secured business loan.
Different Kind of Business Loan Options Available in the Market
Term loans are the best option available in the market for a businessman. He can avail a loan in a lump sum, which he can repay it in a specific period of time. Term loans can either be secured or unsecured. If a businessman has its own property, he can go for a secured loan, if not, he can go for an unsecured business loan.
Short Term Loans
Short-term loans are the loans which are provided for only a short period. Lenders offer smaller amounts with short-term loans that come with a tenure ranging between 3 months and 18 months. Basically, they are same as a regular loan but the difference arises in repayment of loan amount tenure.
A Line of Credit Loans
A line of credits is the most useful loan type available for the businessman. It is intended for purchases of an inventory and payment of operating costs for working capital and business cycle needs. They are not intended for the purpose of purchase of equipment. It usually carries the lowest rate of interest. Payment of interest is made monthly while the principal amount is paid off at your convenience.
Working capital loan
This is a specialised loan available for meeting the working capital requirements of the business. The loan aids in meeting cash shortages or a sudden requirement of cash in the business. These are short-term loans with repayment tenures up to 12 months. Working capital loans are usually offered as unsecured loans which are available instantly. The interest rate is, therefore, higher.
Personal Loan for Business
When a business owner has an urgent requirement of funds then, he can go for a personal loan for business purpose but a personal loan is not granted to start a new business. If your business is new and you don’t have any credit history yet, then a personal loan is the best option for you.
Pradhan Mantri Mudra Yojana (PMMY)
Pradhan Mantri Mudra yojana is a scheme launched by Mr. Narendra Modi, the prime minister of India, specifically for the Micro, Small and Medium Enterprises (MSME) industry in the non- farming sector. These loans are provided by banks and Non-Banking Financial Company (NBFCs). This scheme helps in uplifting and developing the MSME sector belonging to the non-farming industry. All types of banks offer this loan to MSME businesses under three stages – Shishu, Kishore, and Tarun. Shishu loan is allowed up to Rs. 50,000, Kishore loan is provided from Rs. 50,000 to 5 lakhs and Tarun loan are offered from Rs. 5 lakh to 10 lakh for established businesses who want to expand their business.
For buying expensive equipment, businesses can avail equipment financing. If a business owner wants to purchase an equipment for his business, then equipment loan is the best option. The rate of interest in equipment financing as low as it is secured against equipment.
Above these are the different types of business loan options available in the market. By using these types, you can use your funds in the best way. So, first analyze your business need and choose the best business loan option. The business loan interest rates differ among all the different types of loans. You can choose a loan based on your business requirements, the amount of loan required and the applicable interest rate.