Business finances might look tricky at one point or the other. Especially in the dynamic environment, we live in today, business owners might be wondering about the best possible way to get funds for various business operations. The needs of these small businesses can vary from time to time. Some of the business owners require the amount to purchase assets, including land and inventories.
In contrast, you may need it to go on with the basic operating expenses, including salaries and overhead. Usually, a business tends to require the fund during the initial stage. Here are the eight best options of a personal loan for business owner.
Working capital loan
It is a type of loan that enterprises use to meet daily business requirements. They are known as short-term loans with a repayment tenure of 12 months. Moreover, it is termed a collateral-free loan. The interest rate on this loan is a bit higher. But one does not have to provide any collateral or security.
Letter of credit
Most of the trading business uses the letter of credit. In the letter of credit, the lender or Bank offers funding to various enterprises that deal with international trade. One can utilize the letter of credit for both export and import purposes. Enterprises that are involved in international trade have to deal with unknown suppliers. It calls for assistance and assurance of payment before any transaction performance. Hence, a letter of credit plays a vital role in offering payment assurance to various suppliers.
Term loan
It is not the type of personal loan for business owners. One has to repay the loan amount in regular payments over a while. The moneylender finalizes the repayments tenure of this type of loan during the loan application period.
Overdraft facility
It is a type of funding that the Bank offers to its account holder. It allows the holder to withdraw cash from the account even if the account has zero balance. The interest charged on this amount would be calculated daily. That Bank sanctions the credit limit to the account holder based on the credit history, repayment history, cash flow, and relationship with the Bank. Every year the financial institution revises the overdraft limit. It is offered against any securities or collaterals.
Invoice discounting
It is a funding facility where the seller receives an amount at a discounted rate in advance from the lender.
Loans under government schemes
The Government of India has various loan schemes to promote medium and small businesses. Different financial institutions offer these loans. Moreover, one can also look forward to restaurant business loans from various schemes, including Startup India, PSB loans, PMEGP, and many more. Small finance banks, microfinance institutions, non-banking financial institutions, and regional rural banks also offer personal loans to business owners in India.
Equipment finance
It is a kind of loan that allows the borrowers to purchase new machinery or equipment. It helps the owner to upgrade their business inventory. Mainly enterprises that are involved in manufacturing sectors tend to enjoy this loan. However, you can also enjoy tax benefits with this loan.
Merchant cash advance
It is one of the mechanisms where the business owner can get a lump sum amount in advance. It helps the owner to run the business enterprise and maintain the daily e-transactions. At times the merchant of the small and medium enterprises might experience a short-term cash crunch. To reduce the liquidity, the merchant might look forward to a merchant cash advance. The repayment facility of this kind of loan is linked with a credit transaction or debit transaction.
After going through this article, you will get a rough idea of the various business loans. You can avail of the loan at an attractive interest rate with easy and flexible EMI. Before you pick up any business loan, it is best to compare the loan information with various lenders.
