A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest.
Businesses require an adequate amount of capital to fund start-up expenses or pay for expansions. As such, companies take out business loans to gain the financial assistance they need. A business loan is debt that the company is obligated to repay according to the loan’s terms and conditions.Banks give you money to run your business, which you have to repay with interest, called a business loan.Your business loan can be secured (you give a collateral) such as your Company inventory, land or machinery and avail your loan at a lower rate of interest.Your business loan can be unsecured (you do not need to give a collateral).You are charged a higher rate of interest.
Owners may avail different types of loans depending on their fund requirements. Companies may choose term loans to meet the fund requirements in the short to long term. Alternatively, they may opt for working capital loans to meet the operational expenses of the business.
The promoters are offered different repayment options as per their convenience. They may work out a repayment plan as per the business cash flows to avoid facing financial difficulties while servicing the loan.
Contrary to popular belief, the business loan rates are not exorbitant. These are determined based on several criteria, such as tenure, the financial situation of the business, market dynamics and the borrowers' credentials.
Several leading institutions like Tata Capital offer loans to businesses without a guarantor or collateral. This makes it easier for small business owners to access funds to meet their cash flow requirements and sustain their ventures.
Companies are able to meet the funding needs to efficiently manage their operations as per the business cycle. Moreover, businesses in the expansion mode are able to use the borrowed amount in different ways to move up in the value chain.