When it comes to understanding business finance and its sources, the scope of discussion can be wide-ranging. From financing through current accounts to business loans and debentures, all can be covered under the types of business financing one can look forward to. However, when reflecting on the term in the general sense, business finance refers to any long or short-term funding, which may or may not involve the use of collateral, availed to meet the business’s funding needs sufficiently.
Now, such financing options can be many originating from different lending sections of the financial market and assuming varying credit arrangements towards lending and repayments. If you are planning to start a new venture or have already laid the stone for one that is in its nascent stage, you may lookout for different types of funding options for your business in its different stages.
Top 5 Business Financing Options You Must Know About
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Loans for start-ups
As the name suggests, these loans are the types of business financing with a dedicated structure aimed towards fulfilling the funding needs of new businesses, i.e., ventures not older than 5 years. These loans come with remarkable flexibility of financing, repayment tenure availability. And overall loan affordability through competitive rates.
As businesses looking for such loans do not carry a long credit history and their creditworthiness is also not established, they may have to meet a handful of strict eligibility requirements to secure funding. They must also back such loan eligibility with necessary documents. An individual running or establishing such a venture can also leverage his/her personal credit history. To meet eligibility and secure necessary funding.
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Term loans
As term loan is an umbrella concept under which various types of business financing. And their sub-types are available, one must know about their loan arrangement and popular types. So, a term loan can be any financing option that comes with a definite tenure within which one needs to repay the entire loan liability to the lending institution.
Under these loan types, one can also choose between secured and unsecured funding options that suit the business’s needs. With such flexibility in borrowing, one can easily choose a loan type that fits their business’s financing needs without straining on the budget.
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Equipment and machinery loans
Equipment and machinery loans are dedicated funding options that lenders provide specifically for the purpose of making such capital purchase. As the financing is of high value to suit such big-ticket purchases of a business. Lenders require such a funding option needs asset collateral before a loan is provided. Lenders also provide tenures of up to 15 to 20 years. To allow businesses to manage repayments better without any financial strain.
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SME loans
SMEs are businesses that meet certain business investment and revenue criteria. And are thus identified as small enterprises and medium enterprises. Today, SMEs are greatly responsible for the growing economic abundance of India. To stand up to their varied funding needs, various lenders have introduced dedicated financing options like SME loans. These advances usually come with tailored terms of use and are typically affordable. Various government-backed schemes have also made SME loans subsidised, allowing businesses to repay the advance at reduced rates.
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Working capital loans
A business, especially in its initial years of operation, requires lump-sum financing. To meet the day-to-day funding needs for smooth venture operations. Such funding can be of crucial importance when a business is seeking to grow and expand its initial scope of operation. In such cases, a working capital loan comes in handy. They are best suited when seeking immediate funding to meet the cash flow requirements of the business.
Other than that, one can also look out for loan arrangements like Invoice financing. To improve the credit cycle of the business and benefit from it in the long run. Business credit cards and Flexi loans are other types of business financing that a venture can look out for to meet day-to-day and recurring funding needs with ease.