Today business is a career for whoever thinks he can make it. Gone are the days when only those people get into it whose family has been in the business. Anyone who has the idea has the funds; the right vision can translate it into a thriving and growing business. This is mostly because of the timely access to the credit facility.
The availability of loans in varied formats and for varying people make it easy for them to realize their goals. It is not necessary that the requirement of loans is for only small businesses, but medium and large businesses also need funds. With the advancement of the technology, the modes have also diversified like offline and online lenders. One can now easily find the type of business loan suitable for the need of the firm.
The types of business loans:
The business loans today are available in varying formats that might confuse the borrowers. One must understand the areas first where the possibility of availing loans exist. This will give an idea of choosing the right business loan for your firms.
- Firstly, the areas could be anything required in the business process starting from the expansion of the firm, the launch of the new product, hiring new employees or so.
- The next possibility of requiring a loan could be in lieu of the point of sale machines used for credit cards and debit cards. This is known as a merchant cash advance.
- Another possibility can be when you aren’t able to manage your working capital which can be due to the posy payment policy of the client.
Whatever your reason there are ample options available today to borrow money. The only things are that either of the lender and the borrower should fulfil certain eligibility criteria. Once these possibilities are understood in a wide sense, the types of loans could be understood through its categories.
Depending upon the nature and the reason behind the loan there are four types of loans the business loans could be divided into four types. They are-
- Term loans,
- Secured loans and unsecured loans,
- Working capital loans,
- Invoice financing, etc.
Understanding these types and their uses-
Talking of the first type of loans which are further classified on the basis of the tenure of loans, one can easily make out that they may have quite a few technicalities. The short-term loan is one which is approved for short tenure like 3-18 months. The long-term loans, on the other hand, are the ones which are approved for around 10-20 years. They are the most basic types of loans.
The second category includes secured and unsecured loans. The secured loans are the ones which are approved against some asset of the borrower. It means that the asset will be seized if he fails to repay within the stipulated time. While the unsecured loans are the ones wherein there is no such requirement.
Coming to the third classification which takes into consideration the reason behind the loans, the point worth mentioning here is the smartness of the borrower. The way the borrower envisions his business plan and thinks to use the loan amount can guide him through picking a loan from this category.
The loans from this category are based more on the needs of day to day business, i.e. working capital. The working capital is that amount required to carry on with daily transactions of your business. The working capital loan is a type of business loan in which one makes a balance for the working capital and can easily carry on the business.
Lastly, the invoice financing is related to the loan amount for the post-payment policy from the client’s side. This type of business loan is beneficial for the small businesses particularly, to carry on their business with smoothness.
Which one is right for you?
Well deciding the best choice amongst the options could be a difficult task. One can do so by knowing:
- The business plan,
- The loan amount and method of disbursal,
- The terms and conditions involved and
- The repayment options.
When one is well aware of these options and their issues which exactly suits your needs, you can go ahead with the firm. Also with the availability of online and offline lenders, you will have a plethora of options. Also, mostly the details are available on the websites of any firm. So doing your homework and math could be of immense help.
The advantages of so many options of business loans are that one can get the loan amount as per the need only. There will be no extra management or chaos or you to distribute and use the amount. Few others can be-
- Better management,
- Efficient usage of the amount,
- Foster’s timely growth,
- Self-reliance increases,
- Better profit margins, etc.
These were the advantages that getting loans approved from the firms have. One can easily make smart choices amongst the available choices and save and gain profits.
The types of business loans have increased in forms and natures. The diversified nature of the firms has also led even the small and medium businesses to increase their sales and grow. Owing to the variety of business loans the firms can easily choose between the available options by following certain tips. For example, the firms like Indifi are doing a phenomenal job in getting the small, medium and large businesses the timely and easy availability of funds. They are working towards getting even the unsecured business loans in a hassle-free manner.
One must have easily understood the types of varying business loans available. Also one can reap the benefits of these tailored made options available today.