A business loan is a type of financial assistance one can avail to meet various needs of a new or growing business. The lender feels comfortable offering a business loan to a borrower if the application has a strong ‘business plan /project report’ with decent cash flow goals and capital gain much greater than the interest of the secured loan. If you don’t have capital in hand, it is better to go for business loans in the following scenarios.

Planning to establish a new business
Planning a rapid business expansion
Need new equipment and machinery for your business
Require additional working capital for your business
Need capital infusion in the business to turn it profitable
Need capital to replay previous loans

What are the Types of Business Loans?

There are 8 types of business loans based on their nature.

Term loans

Lenders offer both secured and unsecured business loans based on the state and needs of the business. There are three types of term loans available with the lenders, these include a) short-term loans, b) long-term loans and c) intermediate loans. The repayment schedule of term loans can be monthly or quarterly. Based on the term loan secured, the type of interest can be floating or fixed. Part of popular schemes such as MUDRA, PMEGP, etc come under this

Demand loans

A demand loan needs to be repaid based on the demand schedule of your lender. Banks and financial institutions offer both secured and unsecured demand loans. The repayment tenure of demand loans extends up to a maximum of 12 months.

Loan against securities

Such loans are offered based on bank-approved financial securities such as insurance policies, mutual funds, Demat shares, saving bonds, fixed maturity plans, etc. Such loans can be secured to mitigate an immediate financial crisis

Invoice discounting

During a financial crisis, the business can secure instant cash from the lender by submitting invoices of credit sale as a security

Letter of credit facility

Typically, businesses use this type of loan in international transactions. This type of loan can be availed based on the creditworthiness of the buyer’s bank when the seller and the buyer do not know each other. This ensures on-time payments to the seller based on the letter of credit offered by the bank

Cash credit facility

It is similar to the overdraft facility. In this facility, the maximum withdrawn limit is set by the lending bank. The repayment tenure can be renewed for such loans in each 12. Best for working capital management.

Bank guarantee

It is a type of secured loan and can be availed with a mortgage or bank guarantees such as property as collateral.

Women-specific loans

The majority of the banks and Non-Banking Financial Companies (NBFCs) offer exclusive women-specific loans to promote women’s entrepreneurship. These loans come with a plethora of benefits such as lower interest rates, flexible repayment tenure, etc.

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, all public and private sector banks working in India accept our project report. Click to create your report.