Business always demands a high-value investment at most times. Whether a business is small or big, it needs additional funds to meet the daily requirements. All these requirements have one solution i.e., a Business loan.
A business loan, also known as a commercial loan, is one that is provided by banks and NBFCs to businesses to meet their immediate financial needs. There are many different types of loans available in the market. Partnership firms, self-employed, privately held companies, or small businesses can get these commercial loans.
5 Types of Business Loans in India: Everyone Must Know
In India, there are the top 5 different types of business loans available in the market. When you go to opt for a commercial loan for your company, you need to decide which loan is fulfilling the demand of your business. Let’s get to know about different types of business loans in India.
Term Loan
One of the most common business loans is a term loan offered by lenders. The loan amount in a term loan is majorly dependent on the history credit of the business. If the loan is secured, the tenure of 15-20 years, and unsecured loans have 1-5 years. Most people opt for this loan for business growth or capital expenditure. However, the paying-off tenure of term loans decides whether it’s classified in the short term or long term. You can check CIBIL score before applying for the term loan to understand your creditworthiness.
Working Capital Loan
People seek working capital loans when they experience financial hardships during normal business operations. It is also popular as a short-term business loan, and it gives you support in your business when you have no regular cash flow. In this loan, the lender sets the limit for the business to take the loan, and then the amount will be used for the particular business.
Overdraft Loan
The overdraft loan is an allocation bank provides to their account holders to withdraw the amount if they have zero balance. Before allocating the service, the lender examines the business finance flow and repayment history. The interest rate will be charged on the used amount of the authorized limit. Every year, the overdraft limit changes and can be easily used if the interest is paid on time without penalty. It is better to check CIBIL score before applying for an overdraft loan.
Loans Under Government Scheme
In India, its Government has many amazing loan schemes for businesses. The loans under government schemes are offered by various financial institutions, such as Private and Public Sector Banks, NBFCs, Regional Rural Banks (RRBs), Micro Finance Institutions (MFIs), Small Finance Banks (SFBs), etc. The Government offers loan schemes according to the business needs, business plans, and sizes. Moreover, the Government has special loans for female entrepreneurs to help them grow.
Loan Against Property
One of the best loan solutions if the business demands more than Rs. 50 Lakhs, then a property loan is best. The tenure of the loan against property is about 10-20 years. It is essential to have the property free if you want a loan against the property. Up to 70% of the property’s market value is what the lender will offer you. A loan against property is one of the secured loans, and lenders will approve it once they see your strong business plans and finances. Therefore, you should check CIBIL score before applying for the LAP.
Conclusion
After learning about the different types of business loans in India, you can easily find the best business loan for your business. These loans can be obtained at a nominal price and easy EMIs. First, check CIBIL score before applying for any business loans. Now with this information, you can choose the best business loan for your firm, expand your business, and raise the success bar.
