The startups today need to borrow business loans as any business requires capital assets and expansion. The millennials today have dreams of owning an enterprise and for this, factors of production land, labour, capital and enterprise are necessary. Capital is of paramount importance and hence it is required for the expansion and smooth functioning of the business.
During the initial days of running a business, it can fund itself through self-financing and borrowings. For further financing of a business, it needs to borrow capital from the market.
A business loan is a loan that is availed for running the day to day business activities or may be utilized for expanding the business.
The major advantage of taking a business loan is that it doesn’t affect the ownership of the individual in the business. The stake of the owner remains the same and the strategies can also be applied with the availed funds. As entrepreneurs, the need for business loans has to be known.
Some of the reasons are listed below to take Business loans
Marketing
The target audience for any product or service always wants the products or services to be better and to do more than what is delivered at present. Thus, any organization should not remain content with the products and services that are delivered at present. They should be constantly improvising and improving on the services and these processes need to be marketed by experts to get a response from the target audience. The launch of new services also helps to widen the audience and the scope of any organization.
Working Capital Requirement
Any organization requires working capital at any point in time and any stage in the life cycle of its business. The working capital is described as the difference between current assets and current liabilities. The working capital requirement may arise because of uneven demand or any seasonal factors affecting the organization.
Also Read: How Do I Qualify For A Business Loan?
Inventory
Any enterprise which is in the field of production needs inventory at the workstations. The inventory requirements are generally fixed by the operations team but any innovations which help the organization to save costs and also increase productivity are to be purchased and thus funds may be acquired through a business loan.
Debt
If any organization has multiple debts which have been availed, a single business loan can be taken to consolidate all the debts and thus repay the debt at a lower interest rate. A debt that is repaid promptly will also give a better credit score to the organization. It is easy to manage and repay the debts in this way.
Human Resource
As the operations of the organization increase and the expansion process continues, the entity requires hiring new staff and competent employees at the organization. For this purpose, a business loan can be taken and the organization can put into place the human resource strategies.
Cash Management
A study indicates that a lot of enterprises are not profitable because of poor cash management by the entity. For the business to keep going and operations to go smooth, organizations need cash or money flowing continuously to meet the needs of the entity. When there are obstacles faced by the organization, the cash flow management is taken care of by the business loans, which enable the services like marketing, seeking more customers, and conversion possible.
Paying Tax
Every organization has to pay tax either quarterly or semi-annually or annually. It might happen that due to some circumstances, due to any mistake or inadvertence, the tax has not been paid and the penalties paid for these are huge. A business loan can help to make up this shortfall and the taxes can be paid with the help of the business loan and the liability can be fulfilled.
Demand
In the industry, any organization can face a sudden surge in the demand due to various factors such as seasonal factors, factors due to any change in the governance policies etc.
In today’s business scenario, the loan is nothing to be scorned upon. It only helps the organization to grow in a planned and successful way. The fact that a loan is a burden is long lost and thus, we should be encouraging the business enterprises to avail of a loan to scale up their operations and also in turn help the economy of the country to grow in a matured way.
A business loan can be availed for scaling up any business or even if the entity has to hire new talent. The reasons for availing a loan can be many and in the present environment, taking loans and paying off via EMI which are easy monthly installments is completely normal. Business loans are unsecured and do not need any collateral or security for the application. This helps to make the process simpler and hassle-free. The added benefit is that the loan increases the creditworthiness of the business. If the payment of the loan is made in time and properly, it increases the credit score and thus the creditworthiness of the entity. The business loans are disbursed quickly and thus the entities do not have to halt any of their operations.
Also Read: The CreditMantri Guide to Business Loans
FAQS Advantages Of Taking A Business Loan
1:Do business loans have tax benefits?
Yes, business loans have tax benefits.
2:Can business loans be taken only for specific purposes?
No business loans can be taken for a variety of purposes and hence no specific reason has to be stated.
3:Can one business loan be taken to repay other existing loans?
Yes, a business loan can be taken to pay other existing loans at a better interest rate.
4:One advantage of a business loan is?
The ownership of the entity is not affected if a loan is availed rather than listing the company or taking in new investors.