Loans are a conspicuous part of any business. Every business needs financial help in form of loans at some point or other. A business loan helps you sustain and grow your business by buying inventory, upgrading equipment or infuse cash-flow in to operations.
Business loans are classified as short-term and long-term, tailored to meet specific business needs. Each of these loans has its own advantages. Read on to know the various aspects of these loans to make an informed decision.
What are short-term business loans?
As the name suggests, short-term business loans are for a short tenor, usually a little more than a year. A short-term business loan gives you instant liquidity for needs such as vendor payment, stocking inventory, paying employees, and maintain seasonal cash flow among others.
Since short-term business loans are for a short tenor, they usually don’t need a collateral. It means you can avail them without pledging any asset as security. Also, these loans require minimum documentation compared to long-term loans.
What are long-term business loans?
Long-term business loans are high amount loans that come with a long tenor which can extend to 5-10 years or even more. These loans can be used for business expansion, technology upgrade and purchasing state-of-the-art machinery among others.
Since long-term business loans entail a large amount, generally you need to pledge an asset as collateral to avail them. Also, disbursal of these loans takes a little more time compared to a short-term loan. Lenders might also ask for some extra documents, such as the copy of your company’s balance sheet, while processing long-term loans.
Which one do you need?
Ultimately, the type of loan you choose entirely depends on your business needs. If you need funds for bridging cash-flow gaps or stocking inventory, a short-term business loan would suffice. On the other hand, long-term loans can help in business expansion and technological upgrade.
Regardless of the type of loan you choose for your business, it’s essential to plan your financing in a prudent manner. Evaluate how you are going to use the money to make profits that would help you to repay the loan with ease.
Pre-approved offers from Bajaj Finserv on business loans, home loans, and personal loans among others, help you avail hassle-free finance. Know your pre-approved offer by sharing a few basic details.
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