Running a successful small business is challenging. Every entrepreneur who has their own business would not like to disrupt their operations for any reason. However, one can never predict the external factors that can serve as a roadblock for their business. Amongst the most prominent factors is the need for funds.
Even if you have a steady cash flow, you would need some funds to meet rising costs and keep your cash reserves intact. In such circumstances, Small business loan serves as an ideal partner for budding and experienced businesspersons.
Here’s how small business loans or SME loans can help in the expansion of an SMB (small and medium business):
- For rent/lease purposes:
Consider this scenario – you are a small business owner and have an office facility of 1,250 sqft. Your business is doing well, and you want to expand the operations. You are looking for a bigger office with extra furniture and workstations. You can use a small business loan to rent/lease a facility. These days, NBFCs provide loans without any collaterals to business owners to find a larger space for their business.
- For travel:
Small business owners need to travel extensively for the expansion of their business. The journey can sometimes be within the country and overseas as well. You require finances to counter such spending as travel usually involves additional costs that can exceed your budget. Here small business loans can enable you to meet any expenses that would come under the purview of a business trip. If you are on a trip to secure a deal or an important conference, you would not want finance to be a hindrance to your objectives. Hence you need to take up a business loan to cover such expenses.
- For purchase of equipment/raw materials:
Assume that you are a textile owner operating on a small scale. You have a significant order which you need to execute within a stipulated period. If you are short of funds, you can leverage small business loans to your favor by borrowing an adequate amount of money from the financial institution. You can use the funds to purchase raw materials and necessary equipment/machinery to fulfill such a huge demand. In case you have a good credit history, your financial partner would find you qualified for large loans and provide you with the same without pledging any collaterals. Alternatively, you can pledge any collateral to acquire funds from NBFCs/banks to fund your business. Note that you can repay the amount to the institution in easy installments as your lender would like you to have a hassle-free repayment phase.
- Financing of working capital:
You can use small business loans to meet your daily operational expenses, employee salary, insurance, license costs, and other miscellaneous costs. As mentioned before, borrowers would like to provide customized loans based on your requirements. As a business owner, your priority is to strive for business continuity, and hence you would not like the finances to be a significant hurdle in your operations.
Small business loans are of two types: secured and unsecured loans. Secure loans involve collaterals and can facilitate the financing options to the borrower when the credit rating is low. Alternatively, there are multiple types of unsecured loans where the borrower does not need to submit any collaterals or property documents to obtain the funds from the lender. You can check your business loan eligibility with your financial partner. Needless to say that the success of small businesses is crucial for the overall economy of the country.