According to a report, there has been a 40% rise in small business loan disbursals in India in FY2021. This demand can be attributed to the need for supporting the business’s liquidity and expansion requirements.
RBI’s stance to keep the repo rate at 4% has made the small business loan in India feasible for startups and MSMEs. In addition, the affordable interest rate and substantial credit availability make the credit form ideal for urgent spendings.
Apart from the discussed features, the credit form extends certain business-specific benefits. Some of them are discussed below.
What are the reasons to take a small business loan in India?
Here are some reasons that make small business loans in India a lucrative credit form for entrepreneurs-
1. To stock up inventory
Every business, irrespective of its size, needs finances to stock the raw materials and inventory. Usually, enterprises stock up the goods based on the order size and delivery.
However, there are times when a large order can disbalance inventory management. As a result, a firm owner may have to invest additional funds to meet the urgent expenses. In this regard, a small business loan can work as a savior. An individual can avail credit as per requirement and make repayments with the profits earned.
Moreover, a small business loan is a collateral-free credit form, making it a feasible source for new startups with limited assets.
2. To hire employees
A business needs employees and staff to run the operation smoothly. Paying them salary on time requires a firm owner to maintain a substantial fund backup. Depending on the savings or disposable income for the matter can create hassle in future business endeavors. It can also affect the debt to income ratio and credit report.
In this regard, availing of a small business loan seems justifiable. The credit form extends considerable funds to meet the additional expenses for smooth business operations.
In this regard, individuals should look for lenders offering low interest business loans and customized features. For instance, leading financial institutions like Bajaj Finserv provide pre-approved offers to eligible borrowers. This offer is available on financial products like business loans, personal loans, etc., making the loan application simple and hassle-free. Check your pre-approved offers by entering your name and contact details.
3. To expand business
The obvious reason to consider a small business loan in India is to support the business expansion goals. Every entrepreneur desires to extend their branches when the business is booming or earning profits.
However, this growth needs substantial investment for expenses, such as building renovations, increasing staff, buying a new property, advertising, etc. Hence, individuals can use the business loan for expanding their business without disturbing the operational funds.
4. To purchase new equipment
To run a business smoothly, entrepreneurs need to invest in gadgets and equipment occasionally. Additionally, they have to pay for the repair costs, which is quite expensive. There are times when unplanned expenses like machine replacement can disbalance the working capital.
Working with faulty equipment slows down the production and harms the reputation of a company eventually. To avoid such issues, individuals can avail of a small business loan and upgrade their equipment.
5. To maintain cash flow
Maintaining a cash flow is again a big challenge for most small businesses. The problem intensifies if the customers don’t pay the service charges on time. Additionally, the cost of maintaining unsold inventory, building rent, staff payment, utilities, etc., leverage the expense list.
Availing a short-term loan offers a financial backup that helps a business owner regulate the operational cost without pressurizing savings. Keeping an active cash flow also helps create a brand name and drive more customers for revenue generation. It also ensures that a business never runs out of working capital, even during economic instability.
Also Read: 3 Simple Steps to Purchase Property in Dubai 2021
Apart from the mentioned causes, an entrepreneur can utilize the funds against a small business loan for tax filing. The amount repaid in the form of interest to a lender is tax-deductible. This will help in making healthy savings on borrowing for future endeavors.
These are some of the benefits of a small business loan in India, making it an ideal liquidity choice. Though digitalization has made loan applications for said credit easier, keeping a tab over eligibility and documentation requirements is beneficial. This will help in streamlining the entire process and make the borrowing hassle-free.