With every dream to start a business of your own, the first question which pops in your head is that of getting sufficient capital. Without the backing of a certain amount of money, no idea can turn into a reality. This is where business loans come into the picture and help you transform your ideas by bringing it into existence. Business loans in India have helped millions of people start and lead a happy professional life. However, certain factors are to be kept in mind before getting a business loan.
Types of Business Loans You Need to Know about
There are a number of business loans which you need to be aware of before getting into the world of loans. The different kinds of loans depend on the different kinds of needs individuals have for their businesses. Some of the different types of loans for business for you to choose from are:
Term Loans
For building any kind of long term assets, you need a long term loan. With the help of a long term loan you can build infrastructure, purchase different kinds of machinery, vehicles and do a lot more. Term loans which are unsecured usually end within a period of 3 years depending on the kind of interest you pay monthly or quarterly. For secured term loans, the payment procedure can go on for 15 years with smaller EMI to be paid with uniform recesses.
Cash Credit Facilities
Loans which are granted on the securer’s trade, raw materials or processes as an overdraft are called cash credit facilities. In order to get this kind of loan you may have to pledge certain business assets like the inventory or receivables to the financial institution. The lenders also make sure that the balance outstanding is always lesser than the drawing power of the potential borrower.
Demand Loan
Another kind of loan which helps people jumpstart their business is the demand loan. Demand loan is both secured and unsecured. Individuals seeking the loan can choose the type based on their requirements. Demand loans however, give the financial institutions authority to ask for a repay at any given time, depending on their policy. Usually demand loans are asked for to overcome short-term capital issues coming in the way of your business.
Eligible Candidates for a Business Loan
Any individual who is either self-employed or is salaried can easily apply for a business loan and get it sanctioned. Another factor which is kept in mind before granting the loan is that the borrowing business should be profitable for a minimum period of 6 months.The person seeking for the loan needs to be between 25 to 65 years of age as well.
