April 21, 2022 •
These days, small retail businesses look for business loans to aid the expansion of their enterprise. One such type of small enterprise is a shop or a retail enterprise. Retailers and shopkeepers need business loans to set up and grow their businesses.
Local shops are the backbone of our society. As consumers, we rely heavily on a nearby local store to fulfil our daily grocery needs. Such shops may not be financially very sound during their initial days, as the capital requirement may exceed the capacity of the shopkeeper. This is the main reason why they need advances in the form of cash and other incentives from lenders as well as the government.
Here We Have Handpicked the Top 5 Financial Options for Retail Businesses Or Shops.
- Personal loan
A Personal Loan is one such financing option that can help you with all kinds of financial needs. A personal loan is an unsecured loan, so using a personal loan amount for business can be a good end-use of a personal loan. Since they are unsecured loans, there is no need to risk any of your valuables to get the loan sanctioned. Also, you can keep the loan tenure for 5 years, which in turn will reduce the EMI. Before choosing a personal loan, check your EMI with the Personal Loan EMI Calculator.
- Home equity loan
You can take a home equity loan by keeping the equity or shares of your house as collateral, even when the house is under home loan and repayment is in progress. A home equity loan is similar toa mortgage loan, with slight differences. The "first" mortgage is your home loan with which you bought your home. But you can still take an additional loan against your share in the same property. A home equity loan is a secured and multi-purpose loan, so it can be a good financing option for starting a retail business.
- Business lines of credit
A business line of credit is a revolving credit that works similarly to a credit card. It is an agreement between the lending institution and the individual where the lender assures to lend a certain amount to the individual. Unlike a traditional business loan, where the loan is disbursed in one go, here the borrower can withdraw the loan amount in smaller portions as and when required. The borrower must pay interest only on the amount that is withdrawn and not on the entire amount given. The borrower mustmaintain the balance by repaying the amount that has been withdrawn. A borrower can use funds from the line of credit if the maximum amount is not exceeded. The borrower should make minimum payments every month to avoid paying a higher interest rate. A business line of credit is typically used for a longer period of 10 to 15 years. As a result, because of better withdrawal and repayments, you can easily opt for a Business Loan of credit as a source of business funding.
- Equipment financing
An equipment financing loan is a secured loan that helps businesses financially keep the equipment for business. One can buy any type of equipment required for the business with the help of an equipment loan. An equipment loan is self-secured because the equipment you purchase acts as the security of the loan. But you must keep in mind that you must continue paying the loan even if the equipment malfunction before the end of the loan tenure.
- Angel investors
Angel investors are individuals with a surplus fund who want to invest in small businesses for better returns. Most angel investors are generally successful business people. Sometimes angel investors make investments to encourage small businesses. Finding an angel investor is hard although some online portals can connect you with angel investors. Financing through angel investment is never returned in EMIs the investor will have a share in the profits of the business. By investing in small businesses, angel investors buy shares of a business.
Benefits Of Business Loan for Shopkeepers:
This type of loan is extremely flexible and easy to get. The various benefits are as follows:
- Quick Approval:
These small Business Loans get approved quickly. The processrequires very less paperwork and KYC documentation. Usually, this loan is processed faster, and the entire process is hassle-free as compared to other loans. This makes it a very popular option among borrowers.
- Immediate Disbursement
Such loans are disbursed in no time once they are approved. These loans are disbursed immediately, as the purpose of these loans is to provide greater financial access to small entrepreneurs.
- Low-interest Rates
The interest rate on these loans is very attractive, owing to competitive reasons.
- Flexible Repayment
Small Business Loans usually have flexible payment options, which means that the borrower can convert the instalment into an easy monthly instalment and pay according to his profit during the month. Repayment can be made in monthly, quarterly, or half-yearly instalments. With this, the borrower is also eligible for some other loan benefits if he can make the lump sum payment. This makes the entire small loan a very attractive financial aid for the shopkeeper.
- Flexible Tenure
Such loans also have a customized tenor as the loan can be taken for 2, 3, 5 or even 10 years, depending on the shopkeeper's ability to repay the loan. The tenure of the loan can be chosen as per the comfort, feasibilityand suitability of the borrower, and this is what makes such small loans a very good option for small entrepreneurs.
Where Can Shopkeepers Apply for A Loan?
All banks offer business loans for retailers. Similarly, other financial institutions also offer advances. Business credits today are very customizable. The advance amount varies, and the financing cost is determined by considering the individual case observations. This option is also available for companies whose monthly turnover does not exceed Rs 5 lakh, are restrictive, as well as sole proprietor enterprises.
Non-Banking Financial Companies are another good option to apply for a Small Business Loan NBFCs such as Poonawalla Fincorp offer flexible repayment tenure, attractive interest rate, digital process and best-in-class customer service.
When you're thinking about applying for financing options for your retail business, take the time to consider your specific needs and potential qualifications. Not all options may be open to you, depending on your years in operation, credit history, and sales. You can also check the respective interest rates and fees.
- What are the sources of finance in retailing?
Sources of finance in retailing can include bank loans, venture capital, angel investors, personal savings, crowdfunding, trade credit, and partnerships.
- What is the minimum turnover for a Business Loan?
The minimum turnover for a Business Loan with Poonawalla Fincorp is up to ?6 Lakh.
- Why is finance required for a business?
Finance is required for a business to fund its operations, invest in assets, manage cash flow, expand operations, support growth, meet financial obligations, and seize opportunities for innovation and competitiveness.