Review: Becoming a self-employed businessman is an excellent standing in society but the issues faced by the entrepreneurs in the day one of the business is monumental. It’s a terrific challenge for an individual to overcome all obstacles to become a successful businessman. The many problems faced by all is fund. Even great entrepreneurs of various industries have fought plenty of financial crisis for establishing their business and to conduct their daily business operations. Thus finance plays an important function in the life span of business people.
Terrific ideas require the necessary financial aid to blossom into a successful business. Introduction: There are a variety of resources for business people to raise funds for their business. The most trusted source is from banks. There are numerous reasons why people select banks as the best source for raising capital for their business. Banks offer a lower cost of funds in the kind of Business Loans. There are numerous types of business loans in differential interest rates to ease business people to address their financial crises. Kinds of Business Loans: Businesses are of different kinds and need finance at various phases of their business operations.
The need also being distinct, banks assist them in providing different kinds of business loans assisting various small and medium enterprises to raise capital. New Project Loan – Investors are considering financing for new businesses and for new projects of current business. There are numerous criteria for getting a new job loan and differs from bank to bank. Project loans are approved against the security of the individual like residential property, commercial property, or vacant land. Top-up on Existing Loans – These loans have been issued for growth, replacement, diversification of an existing business. Such loans are approved for short term or long term basis to get goods, machinery, or some other fixed assets for the business.
Working Capital Loans -These loans are provided for the business to address sudden financial crises and reimbursed within short durations. Banks are more interested in providing working capital loans from their stocks, stocks, or receivable invoices of the business. Secured Business Loan – Business loans where firms raise their funds against any security for the lender. It could consist of the plot, residential or industrial areas, gold, stocks, invoices, insurance as security to receive funds for their business.
The rate of interest is preferably less. Unsecured Business Loan – Each businessman cannot afford to guarantee security in receiving the business loan, so bankers assist them with loans with no security based on bank transactions and income tax returns. Such loans are charged with more interest rates when compared to secured business loans. Demands of the Banks: There are various measures and processes followed by banks to provide capital. The process and documents to be submitted to the banks as follows Identity and address evidence of this company – Address proof and identity evidence of venture or proprietor business.
Statutory legal registration of the firm – Whether the organization is legally registered under government standards and have followed all procedures legally in establishing a business. Financial statement of the company – Each lender is interested in seeing the current 1-year business transaction of the organization. Income tax returns – ITR aids the bankers to confirm the business performance, efficacy level, assets, and liabilities of the business and also tax that the firm pays from their present earnings.
This also plays a significant role in deciding the amount of the loan for the business people. Financial Security – It includes the fixed and movable assets of the company which assists the banker to look at providing business loans based on the asset value together with the business transactions. This protects banks from the collapse of businessmen who fail to repay the loan amount. Previous Loan trail – This is an essential factor considered by banks that will help them assess the financial state of the business and also to check on previous repayments on loans.
Litigation – It will help banks evaluate the character of businessmen before supplying a business loan. Takeaway: Though business loans are regarded as an excellent resource for raising capital, businessmen experience challenges in receiving timely funds from the banks. So as to assist them in availing timely loans, even NBFC is also now ready to assist them with funds at different stages of their business. Banks & NBFC also have made the lending process simple, with all confirmation done in shorter time-span, doorstep aid in collecting documents, etc.. Businesses with good cash flows & credit rating may avail timely funds with much simplicity.