Learning to be a self-employed businessman is a good reputation in the culture however the problems faced simply by the entrepreneurs from your day among their business is tremendous. It is an excellent problem for a person to get over all obstacles to become successful businessman. The many issue faced by all can be finance. Even great business owners of various industrial sectors have struggled a whole lot of financial meltdown for establishing their business also to operate their daily business functions. Thus finance performs a major function in the life of business people. Great suggestions require the necessary financial support to bloom into a successful business.
There are various sources for business people to raise capital for their business. The most trusted source is from banks. There are various reasons why people choose banks as the best source for raising capital for their business. Banks provide a lower cost of funds in the form of Business Loans. There are various types of business loans at differential interest rates to facilitate business people to solve their financial crises.
Types of Business Loans:
Businesses are of different types and need finance at different stages of their business operations. The need also being different, banks help them in providing different types of business loans helping various small and medium enterprises to raise capital.
New Project Loan - Banks are interested in funding for new businesses and also for new projects of existing business. There are various criteria for getting new project loan and differs from bank to bank. Project loans are approved against the collateral of the person like residential property, commercial property or empty land.
Top-up on Existing Loans - These loans are issued for expansion, replacement, diversification of an existing business. These loans are approved for short term or long term basis to buy goods, machinery or any fixed assets for the company.
Working Capital Loans -These loans are provided intended for the business to solve sudden financial crises and repaid within short durations. Banks are more interested in providing working capital loans against their inventories, stocks or receivable bills of the company.
Secured Business Loan - Business loans in which companies raise their capital against any security for the bank. It may include plot, residential or commercial places, gold, shares, bills, insurance as collateral to get funds for their business. The interest rate is preferably less.
Unsecured Business Loan - Every businessman cannot afford to pledge a security in getting the business loan, so bankers help them with loans without the security predicated on bank transactions and tax returns. These financial loans are charged with an increase of interest rates in comparison with secured business loans.
Requirements of the Banking institutions:
There are many steps and procedures accompanied by banks to supply funds. The task and documents to end up being submitted to the banking institutions as follows
Identification and address proof the business - Address proof and identification proof partnership or proprietor business.
Statutory legal registration of the business - Whether the company is definitely legally registered under government norms and have followed all procedures legally in setting business.
Monetary statement of the company - Every bank is interested in seeing the recent 1-year business transaction of the company.
Income tax returns - ITR helps the bankers to check the business performance, efficiency level, property and liabilities of the company and also tax that company pays from their current income. This also plays a major part in deciding the loan amount for the business people.
Financial Security - It includes the fixed and movable assets of the company which helps the banker to consider providing business loans based on the asset worth together with the business transactions. This also safeguards banking institutions from the failing of businessmen that neglect to repay the loan quantity.
Previous Loan track - That is an essential factor regarded by banks which can only help them evaluate the economic condition of the business enterprise and also to check up on past repayments upon loans.
Litigation - It can help banks assess the personality of businessmen before providing a business mortgage.
Though business loans are located to become a great source for increasing capital, businessmen undergo challenge in getting timely funds from the banks. To be able to help them in availing timely financial loans, even NBFC can be now ready to help them with money at various levels of their business. Banking institutions NBFC also have made the lending procedure easy, with all verification performed in shorter time-period, doorstep assistance in collecting paperwork etc. Businesses with great cash flows credit history can avail timely money with much ease.