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Why You Should Take a Business Loan to Pay Your Business Bills and Reduce Debt?

  • Highlights

  • Business loans are easy to qualify for

  • It doesn’t take time to apply for a business loan

  • You get a high loan limit for your needs

  • Business loans are collateral-free for easy processing

A growing business often has a lot of bills to pay, from rent and electricity to inventory and raw material purchase, buying needed equipment and paying staff salaries. If your business uses a credit card, unpaid debt can also mount up quicker than you realise, especially if your receivables collection cycle is slower than your due payments cycle. Rather than delaying salaries or vendor payments, which can impact your reputation, take a business loan to tackle your financial needs.A business loan is aprudent way to pay your business’ bill and reduce debt for the following reasons.

It doesn’t require you to put up company or personal assets as collateral

Taking a business loan is can be beneficial to your business in both the short and the long term. Consider the example of Suresh, a textile manufacturer who wanted to take advantage of a drop in cotton prices to buy a larger-than-usual quota of raw material—an investment he had not planned for. A personal financier told him that he needed to use his house as collateral while the bank told him to use his knitting looms as security. Unwilling to put up his personal assets or essential business machinery as collateral,

he finally opted for a collateral-free business loan. This helped him finance the additional outlay for inventory in the short term, which also boosted his profits. Plus, the loan helped his textile firm build business history, which had a positive impact on his credit score in the long run. Suresh soon found himself getting cheaper loan offers from lenders.

It is easy to qualify for and doesn’t take time to apply

Unlike traditional loan applications where the loan process takes over a month, a customised business loan by a lender specialising in SME finance has simple eligibility criteria with fast approval and sanction. All you need is to be within 25 and 55 years of age, have a business with a vintage of at least 3 years with IT returns filed for the past one year and the previous year’s turnover duly audited by a chartered accountant. Since there is no collateral to attach, you can apply for it faster and since there is no collateral to be assessed, your lender can also approve your application quickly. With an easy online application, you can apply for this loan in just 5 minutes and get approval within 24 hours. This makes it easier for you to take a sudden business decision. Suresh, from the example above, was able to bid for a larger lot of cotton due to a sudden slash in price, since he knew his business loan application was approved the same day that he applied for it.

It gives you cash for urgent needs

Apart from fast application and approval, submit the right documents and you will get the funds within 48 hours. The paperwork is minimal, and all you need are your passport-size photos, KYC documents, certificate of business existence, bank account statements and financial documents. Suresh, thetextile manufacturer, found himself in a dilemma when half his power looms stopped workingdueto a short circuit. He knew he needed to get them repaired quickly as he was losing time on orders on hand. He had already taken a Flexi Business Loan earlier which gave him access to a loan limit. Since he could avail funds from this loan limit up to his limit of Rs.25 lakh as and when he needed, he was able to immediately withdraw Rs.5 lakh to repair his looms and get his factory running. Find out more about the Flexi Business Loan options here.

How To Get Small Business Finance From Bajaj Finserv

The life cycle of working capital

Working capital is the life blood of any small or medium sized enterprise. Without adequate funds to keep the business’s day to day operations running, the business can falter in its commitments to clients. Therefore, knowing what a working capital cycle is, and how to make the most of it, is essential for any business owner. Here, we tell you how to determine the working capital cycle of your business, and how you can speed it up.

The life cycle of working capital

It builds business credit:

Business loans give you a principal of up to Rs.30 lakh. And, you have complete discretion over the use of this amount. You can borrow any amount within this limit to finance your expansion expenses. For example, if you’re the owner of a restaurant, you may want to add an al fresco dining area.Even if you’re adding only five more tables to your premises, you will have to budget for furniture, a sous chef, line cooks, outdoor fans and landscaping and interior designing.

It is cheaper and smarterthan using a credit card:

A business loan is a better option than using your personal credit card to pay for business expenses. Using personal finances for your business complicates accounting and can start to affect your personal credit history. A business loan, on the other hand, comes with a significantly lower rate of interest than a credit card, and is attached to the business rather than to your personal account.

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