A business, irrespective of its size, needs an additional source of funds to meet its daily requirements and emergencies. The required amount of funds also depends upon the type of business. The service sector often needs a smooth flow of funds in order to maintain the right stages of development in the right manner. The loan industry offers various options for small business loans for the service sector.
A working capital loan
A working capital loan is one of the most popular loans. Taken by small and medium-scale businesses in India from banks and non-banking financial institutions. A working capital loan is used by a business to meet daily requirements like buying machinery, equipment, raw materials, and salaries for employees. It is one of the most tailored forms of business loans offered for the service sectors. In order to maintain and meet the delivery of manufacturing and service-related requirements. It is basically a short-term loan, and the repayment usually happens between one and two years’ time.
A working capital loan is a completely unsecured form of a loan. Where the borrower does not need to pledge any form of security in order to get a business loan. However, if you compare it with other forms of business loans, you will always find that. The working capital loan is expensive as the rate of interest is high. It is one of the best choices for the service sector to arrange a smooth flow of funds to maintain operations in the right manner.
Credit card for business
A business credit card is used by a small-scale or medium-scale business to make expenses. Purchase related to business that are not very expensive. Small-scale businesses usually take from a non-banking financial institution in India. A business credit card is a revolving loan that comes with a fixed credit limit.
For example, if a business credit card comes with a credit limit of 50,000. A business is able to make a purchase of 50,000 maximum, according to need and necessity. The business needs to make the payment by the due date.
Small business loans
A steady flow of funds is always one of the most important factors in our company’s ability to operate and expand. A small business loan is a short-term business loan that is completely flexible and can be used for any expense that is related to business. Small-scale and medium-scale businesses often take a small business loan in order to meet various expenses without any end-usage restriction.
Therefore, for service sectors and various other industries, a small business loan is one of the best ways to get instant cash for business-related expenses. The repayment stream is easy and flexible with monthly installments.
Term loan
A term loan is a kind of business loan that is usually taken by the service sector in order to meet various needs and emergencies in business. It is a type of loan that involves repayment in regular instalments over a fixed period of time. It comes in two forms: a short-term and a long-term loan. The loan term usually ranges between 1 and 10 years in length. It completely depends upon the business to choose the term of the loan based on the repayment capacity.
In particular, non-banking financial institutions and the banking services offer short-term loans to businesses. It range between 12 to 24 months. The loan amount can be anything between 1,00,000 and 1,00,00,000 completely depending upon the size and the requirements of the business along with the eligibility criteria.
Business overdraft loan
A business overdraft loan is a kind of business loan where the business owner is able to withdraw an amount from the account even if the account balance is zero. This kind of loan comes with a sanctioned limit on a daily basis. The credit utilisation limit will completely depend upon the credit history, repayment history, business type, and various other financial activities.
The credit limit also improves for an individual. The business has with a particular bank or non-banking financial institution.
Final thoughts
It is important for a business to take a small business loan at the time of need or an emergency in business. However, if you need an affordable loan, it will be important that you use a business loan interest rate calculator to make calculations easy and compare all the available loan options before choosing one.
