Working capital needs constant replenishment for operations, infrastructure, and raising profits. Moreover, without investment, the growth of a business is not possible. Therefore, to bridge the gap, opting for a business loan is the best solution.
According to a recent report, in Dec 2020, Finance Minister Nirmala Sitharam sanctioned Rs.3 lakh crore to distribute as business loans. This helped business houses to maintain the corpus knocked down by the economic downturn throughout 2021. To make an online business loan easily accessible, financial institutions offer both offline and online business loan application processes.
4 Financial benefits of a business Loan
Besides being a great funding source, it is also a liquidity consolidation tool. Details of its benefits are as follows-
- No requirement of collateral
A business loan is an unsecured credit instrument, where businesses do not have to pledge any asset as collateral. Therefore, it is very helpful for small business owners who don’t have enough assets to apply for a loan.
- Flexibility of usage
Business loans come with no end-use restriction. Therefore, one may use it to clear outstanding debts, run daily operations, buy machinery, stock raw materials, expand businesses etc.
- Tax benefits
Under Income Tax Act 1961, the amount paid as interest for a business loan is tax-deductible. However, there are different slabs of eligibility for deduction. Besides, business expenses that are sustained to maintain and run daily business operations can also be deducted from the total business revenue generated before getting calculated as taxable income.
- Convenient repayment process
A business loan Why Loans are Better than Credit Cards? offers a long repayment tenor. A borrower can choose the repayment tenor based on his//her financial capabilities. However, the loan tenor directly impacts the rate of interest. Therefore, one must carefully select a tenor.
Some financial institutions like Bajaj Finserv offer a Flexi loan facility that offers multiple repayment options. The interest is charged only on the withdrawn amount and not on the total amount taken as a loan.
In the initial period, only the interest on the withdrawn amount can be repaid as EMI. Later, the principal can be repaid. This reduces the total borrowing cost of the loan. You can check the details of repayment from the online business loan segment of the chosen lender’s website.
Types of business loans
Many financial institutions had subdivided the segment of business loan for addressing specific verticals of a business, those are:
- Working capital loan – This is categorically given to maintain cash flow and be secured against financial roadblocks.
- Machinery Loan – This is categorically given for buying equipment.
- SME/MSME Loan – Given to small business organisations to start or maintain the business operations.
- Business loan for women – Only women entrepreneurs can get a maximum of up to Rs.45 lakh for running business operations.
What are the documents required for a business loan?
Documents required for a business loan are as follows:
- Id proof – KYC documents, including Aadhar card, PAN card, passport, or driving licence.
- Address proof – Utility bill, lease agreement, etc.
- Business ownership proof –
- Registration documents.
- Partnership agreement.
- Memorandum of association.
- Certificate of commencement.
- Financial documents –
- ITR of last financial year.
- Bank account statement of last 6 months.
- Audited balance sheet.
- Profit and loss statement of last two financial years.
To maximise the benefit of a business loan, individuals can choose trusted NBFCs, like Bajaj Finserv and avail their pre-approved offers. These offers simplify the loan application process, expedite the approval, and save time. Individuals can check their pre-approved offers by share essential contact details with the lender.
Business loans enable enterprises to expand their operations without any financial crisis. All the schemes are structured to let the corporate house continue the daily business activities during financial strains.
Moreover, the online business loan procedure has made the process easier and transparent to all. One can get approval by submitting relevant documents from the convenience of his/her home.