When is the Right Time to Take a Business Loan?

Many startups and businesses start with little capital and big dreams. Thankfully, there is a facility called a business loan that can help you achieve your dream quickly. Be it getting more equipment, increasing the level of inventory, or any other business objective, a business loan can help you in achieving your business goals with ease.

A business loan is particularly helpful for a small and medium business owner that can expand the wings of business with help of additional financing available. SMEs are a key element in any economy due to the number of direct and indirect jobs they create. For the Indian economy, SMEs are the backbone of the massive economic growth the country is witnessing today. Although the COVID-19 crisis has been a shocker for the SME sector in particular, with the opening up of the economy, experts believe that the SME sector will witness a lot of activity for economic growth and expansion.

It is expected that many small, medium and large companies will opt for a business loan in the coming times. However, with the interest rates touching all-time low and every other business you know opting for a loan, it is important to know when is the right time to go for a business loan.

Gone are the days when taking a loan was looked down upon and there was a threat of interest and other hidden costs that would sink your ship. Today, with tight regulation and transparent, trustworthy lenders like Poonawalla Fincorp, you can be assured that a business loan will only help you to grow further.

Here is all you need to know about business loans including the best time to take a business loan:

What is Business Loan?

A business loan is a mode of sourcing additional financing to meet your business goals. With the help of knowledge, you can expand your business, buy machinery or even boost production and gain good returns quickly. The business loan, like any other loan, comes with anattractive interest rate which you have to pay depending upon the lender you choose.A business loan is a type of external finance that a company can use to fund its operations. A business loan can also help an entrepreneur start a new business or purchase an existing one.

Interest rates on business loans are often higher than other types of financing like a home loan or loan against property. However, it is a collateral-free loan that is provided by the lender based on the past performance of the business and the credit profile of the founder directors. Hence it is much more efficient as compared to the other loan categories to expand a business.

Bank can quickly provide you with a business loan, so you don't have to worry about a lack of funds. Some lenders like Poonawalla Fincorp offer a new business loan up to Rs. 30 lakh with quick processing, minimal documentation, and zero hidden charges.

One of the major benefits of a business loan is that you don't have to hustle a lot or do a lot of paperwork to get the loan approved. You can also get doorstep services from several lenders.

You can choose the tenure for your business loan. If you require a loan for the short term to meet your machinery expenses, you can take a loan just for a year. If you want to take out a loan for a longer time, like 2-5 years, you can choose accordingly in consultation with your lender.

Importance of Taking A Business Loan at A Suitable Time

A business loan helps you bring the funds for your business without harming the fundamentals and long-term strategy of the business. For companies, financing is an engine that also drives business growth.

Here are some of the reasons why it is important to take a business loan at the right time:

Start your business without financial issues

If you have any business or a startup idea, it is difficult to get the initial capital. If you do not have money for the initial business expenses, a business loan will help you buy equipment and machinery and pay the salaries to the employers in the initial phase of the business. You can easily focus on running your business without having any financial pressure.

Running your business smoothly

There are several times when startups and businesses have to facedifficult situations. While vendors demand the payment and payments are getting delayed, you can count on a business loan to run your business smoothly.

Business expansion

Expanding a business is very challenging in this digital world. It requires a lot of funding, advertisements, and other expenses where a lender can help you to scale your business in the market. With the help of a business loan, you can afford big offices and more resources to serve your clients.

Manage working capital

As a business owner, you need to manage the working capital requirements of the business. Business loans can help you maintain the cash flow during hard times in your business. Business loans will help you remain financially stable and tension-free to focus on profits and market expansion in the changing digital world.

Flexibility

As a business owner, you can apply for many types of loans for your business needs. There are long-term and short-term loans that you can get from lenders as per your requirements. You can choose your tenor according to the expenses, liabilities, and after thorough calculation.

Affordable interest rate

With lenders offering you a business loan at affordable rates, you can meet your business goals faster. The interest rate depends on the tenor and the credit profile of the business.

Convenient repayment option

Your business can pay off the loan through EMIs with a convenient repayment option. Several lenders offer flexible repayment options so that you can pay back the loan amount at your convenience. You can discuss the period to pay the EMI and quickly get approval for loan from lending companies.

Plan out your business requirements

Check the expenses required for taking new machines for paying salary. Write down all your business requirements and calculate the amount you need as a loan. Know if you need a loan on a short-term basis or for the long term.

After knowing the purpose and period, banks or financial companies will provide you with a loan that meets your business needs.

When is the Right Time to Take A Business Loan?

When you are taking a business loan, always remember that it is a big financial commitment to expand your business. If you are thinking about taking a business loan, you should be clear about the reasons for the same.

The right time to take a business loan is when the company needs it the most. This is typically when they have been told their funding from other sources is not available. It also helps to prove what they plan to spend this borrowed money on and then pay it back with interest.

Taking a business loan is a great decision to go forward and build your business. It's important to know when the right time is to take one so you can make the most of it.

There could be several reasons to take a loan. A business may need a loan for an immediate cash flow problem. Some businesses might also need a loan to grow and enter into new competitive markets. These types of loans may include acquiring fixed assets for your company, building an office space, or buying new equipment.

There are many reasons why an entrepreneur might want to take a business loan. The right time to take a business loan depends on the specific needs of the business. Some of the scenarios in which you can take a business loan are as follows:

•  Physical expansion: Expanding a business is very important. It needs funding, advertisements, office space, and other expenses. Some private service-provider companies can help you grow your business in the market, and you need to pay them. Depending on the kind of expansion you are aiming for, you may need additional funds to keep your foot on the accelerator. It has been seen that companies that shy away from taking a business loan have to sacrifice their growth curve and settle for less. However, in today’s day and age when you have multiple sources of financing available to meet your goals, you should opt for a business loan and continue your growth run.

• Hiring new staff: it is necessary to have staff and pay them regularly. If your business has low financial stability, you can take a long-term business loan and regularly pay staff and employees. Getting hold of good talent and retaining them is a big challenge in today’s times. At the same time, to meet the expanding needs of your business, you may need to hire additional staff. But to hire and retain good talent, you need to pay salaries on time. Therefore, to maintain the salary cycle with ease, you can opt for a business loan that can help you meet your operational expenses with ease.
   
• Equipment and machinery upgrade: the first important thing you need for any business is multiple machines, resources, and equipment. Without these, you won't be able to take and fulfill the orders. Through business loans, you can buy multiple machinery and equipment quickly. When you want to expand your business capacity but are struggling with arranging funds for the expansion, you can always opt for a business loan that will help you get exponential growth in the long term.
   
• Buying Inventory: To get inventory, you also need to invest a lot of money. If you take business loans at the proper time, you will be able to get higher quantities of the products that will help you expand your reach in your existing and new markets. A business loan can help you get better exposure in the market if you time it with your seasonal demand cycle. You will be able to cater to an increased number of consumers and get higher revenue with the help of a business loan.
   
• Research and Development: To grow your business in the market, it is very important to invest funds in the research and development segment in your business adequately. For this, you need to make sure that your business doesn't face any financial issues because of your investments in R&D. This investment can be funded by a business loan that can help you expand your product line with innovative products to disrupt the status quo in the market.
  
  A business loan is an important tool that helps small business owners get financing for their company. Before taking a loan, on the other hand, it is critical to understand how it will impact your business. This clarity will help in the effective utilization of funds. Taking a business loan at the right time to boost the growth curve of the business is equally important.

Tips to Improve Your Chances of Getting a Business Loan

Here are some tips that you can follow to increase your chances of securing a Business Loan:

• Develop A Solid Business Plan: Create a comprehensive business plan that outlines your business’s objectives, market analysis, financial projections, and repayment strategies. A well-crafted business plan demonstrates your commitment and competence, giving lenders confidence in your business's potential.
• Maintain a Strong Credit Profile: Ensure that your personal and business credit scores are in good standing. Pay your bills on time, reduce outstanding debts, and resolve errors on your credit report, if any A higher credit score enhances your credibility as a borrower and increases your chances of loan approval.
• Gather Necessary Documents: Prepare all required financial and legal documents in advance, such as financial statements, bank statements, tax returns, and other documents that provide a comprehensive view of your business's financial performance. Present accurate and up-to-date information that showcases your revenue, cash flow, and profitability.
• Demonstrate Cash Flow and Collateral: Show a strong cash flow statement and provide collateral, such as business assets or personal guarantees, to secure the loan. Lenders want assurance that you can repay the loan, and these factors provide tangible security.

Remember, each lender may have specific criteria, so research various lending options and tailor your loan application accordingly. Also, you can seek professional advice from financial experts or consultants to optimize your loan application process.

Conclusion

To succeed with your application for a business loan, it’s essential to understand some basics about them first. It is also important to know the loan amount you would require. These would be the right steps towards finding the right lender and applying at the right time.

You can always get in touch with us at Poonawalla Fincorp for your business loan requirements. If you are looking at a partner that offers a collateral-free loan with instant approval, and zero hidden charges, you should apply for a business loan with Poonawalla Fincorp today.

FAQs

• Can I get Rs.50 Lakh loan for a business?

Yes, you can opt for a Business Loan of up to Rs.50 Lakh by fulfilling the lender’s eligibility requirements and submitting the necessary documents.

• Can I get a Business Loan without income proof?

Generally, it is not possible to obtain a Business Loan without providing income proof as it is a crucial factor for lenders to assess your repayment capability and evaluate the risk associated with the loan.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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