Business loans are among the most versatile and affordable financing solutions in the lending market. While some business entities avail credit to capitalize on market opportunities, others seek funds to bridge financial gaps. Also, reduced demand and sale leads to a capital shortage, which can be addressed using credit. Borrowers only need to qualify as per business loan eligibility criteria.
It is, however, essential to assess the appropriate time to fund to ensure a venture’s success.
When is the right time to borrow?
SMEs and MSMEs can apply for unsecured business loans on various conditions, including the following.
- In times of economic opportunities
Post the demonetisation phase in 2017, many enterprises adopted digitalisation and upgraded to advanced technology. While this increased revenue generation, the firms had to strengthen working capital to meet the rising demand. Economic prospects like these are ideal to avail of small business loans. You must evaluate the market conditions and invest after proper business planning.
- The need for new inventory and machinery
Inventory and production line, for products or services, are two major pillars for any business’s sustainability in a highly competitive industry. Based on customer demand, a firm needs to either stock up new inventory or introduce upgraded machinery for quality products or services.
If you are looking to amplify the total output, bring in automation or enhance inventory management, you can apply for a tailor-made business loan. With finances of up to Rs. 30 Lakh and simple business loan eligibility criteria, it is hassle-free to invest in expensive machinery or stock up in large quantities.
- To settle multiple small loans
Managing multiple small loans not only creates a financial burden but also increases the total payable interest. In such cases, the profitable option is to avail a business loan of higher value and consolidate all small debts. It makes the loan more manageable, brings down your monthly outflow and improves your credit profile.
Debt consolidation using small business loans is beneficial more because it involves no risk of asset confiscation in case of default. You can follow certain tips to avoid a business financial crisis.
- To increase working capital
Working capital is the money every firm must keep available to bear the day-to-day business operations. Positive cash flow is essential for regular expenses like utility bills, salaries, payment to suppliers, raw materials, etc. The sufficiency of working capital depends on the nature and market of business.
In the case of working capital shortage, you can borrow funds and fill in the financial gaps efficiently. Make sure to understand the life cycle of working capital beforehand.
- Planning for business expansion
Business expansion is perhaps the most obvious reason for owners to borrow additional funds. It can include a host of expenses like marketing and advertising, hiring new employees, renovating, etc. Take an unsecured loan and enjoy unrestricted usage to meet your purposes. You can adopt the tips on expanding to another city for business expansion too.
- Introducing a new product line
Many businesses penetrate new markets or introduce a different product line as part of the expansion. Starting from planning to execution, a business loan can provide financial assistance in every phase. Choose a flexible repayment schedule and utilize the amount strategically to prevent any monetary burden.
While these were some situations how financial assistance can work as necessary investments to further business operations, there are certain business loan eligibility which an interested applicant needs to meet –
- Age – Within 25 to 55.
- Credit score – Over 750.
- Applicant’s profile – Self-employed, salaried or entities.
- Business vintage – Minimum 3 years.
- IT Returns – Must be filed for a minimum of 1 year.
Ensure to check out the commonly asked questions about business loans for more clarification.
Lenders like Bajaj Finserv allow borrowers to qualify easily and apply via an online application form. They also bring exclusive pre-approved offers on business loans, personal loans, home loans and a plethora of other financial products. Whatever be your purpose, availing a business loan from leading lenders offers numerous benefits. Build a positive credit profile with timely repayments and increase your chances of commercial success.