How Short-term Loans Can Benefit Small Businesses
The current business environment presents many challenges to a small business owner. Moreover, the competitive nature of the market also presents a small business with much-needed drive to grow.
Short-Term Loans
Such businesses manage to succeed due to the unorganized state of the market, changing trends, and preferences of consumers. Yet small businesses still face one serious problem – the shortage of funds. The difficulty of getting short-term loans on a timely basis has harmed the progress of many small and medium sized enterprises (SME).
However, things are now changing. Various non-banking and online financial institutions are making it simpler for SMEs to secure their much-needed finances.
Easy procedure:
The procedure of applying for a loan in different non-banking financial institutions can be simple. Such short-term Business Loans are given to different individuals:
- Self Employed Professionals (doctors, architects, CAs etc.)
- Self Employed Non-Professionals (traders, retailers and so on)
- Entities (Partnerships, limited companies that are closely held)
You are required to have certain documents such as your passport size photographs, and relevant business and financial statements. In some cases, the loan may even be approved in 24 hours.
More borrower-friendly:
A typical bank may not be very flexible while processing the loan application for an SME. Various non-banking and financial institutions, however, may be more helpful.
Certain financial institutions even offer short term business loans of up to INR 30 lakhs. Herein, the interest rate can be as low as 14%. Moreover, some institutions also allow making part prepayments in case the borrower is an individual. Non-individual borrowers, however, may have to pay charges of around 2% plus taxes on making part prepayments.
No requirement of collaterals:
Certain short-term business loans do not require you to give a collateral such as property, gold etc. for the loan approval. As there is no collateral, the process of loan approval requires lesser documentation and paperwork.
The line of credit facility:
There are several business loans that offer the borrower this facility. As per this, the borrower is approved for a particular limit of the loan or credit amount. The monthly payable instalment on this facility does not have any principal component, but only the interest amount. The principal amount is to be paid at the time when the tenor for the line of credit facility ends. Hence, this can considerably help with your cash flow.
Flexi Loans:
Some financial institutions also offer you a facility, wherein, you can avail the loan for an amount that is more than what you are eligible for.
Different choices:
The needs of working capital of every SME can be different. And various financial institutions have different loan categories that can cater to those needs, such as – Finance for an online seller, loans for supply chain, facility of cash advance, and various other options.
An SME must clearly define their financial needs and accordingly explore and compare various offers.
Preapproved offers:
In the case of some financial institutions such as Baja Finserv, you can even avail preapproved loan offers. These may include a top-up loan or reduced interest rates.
Short term business loans can be really helpful to small and medium enterprises. For someone having problems with their daily operations of the business, these loans can help them become more sustainable over a certain period of time.
Further, the loan can even aid in the expansion of the business. To ensure that the company keeps growing, you can take a loan to rent a new office, employ more people or even get better IT support.
Survival, growth, profits – There are many things an SME has to worry about. Certainly, the right short term loan goes a long way in making things easier for small business owners.
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Category: Business
