Many entrepreneurs with great business ideas are unable to start their businesses due to a lack of funds. Money at the right time is one main factor that decides the start and the future of a business. However, when new entrepreneurs start, they discover that money becomes the major hurdle. The universal solution to this is nothing but a startup business loan. You borrow a startup loan to help you start operating your business, but like every loan, you have to pay it back.
A startup business loan facility offered by banks or other financial institutes to new businesses or can be used for various purposes such as purchasing equipment, furniture, raw materials, or paying for expenses incurred to set up a business such as purchasing or leasing a building, etc,.
How do you choose a business startup loan?
A startup loan can be extremely difficult to obtain. The main reason is simply the fact that banks do not want to take risks. Obtaining a startup loan often requires a lot of patience, effort, and determination. The maximum amount of startup business loan you can get depends on your business, its turnover, profitability as well as your credit history. Before choosing a startup business loan consider the interest rate, repayment terms, and policy, application fees, etc.
What are the different types of Startup Business Loans?
Startup business loans are classified into two:
1. Short Term Working Capital Loan
It is known as a short-term working capital loan or a line of credit. People use it to pay salaries or other expenses. There is no need for collateral for this loan. Also, it gives an initial interest-free period. The business can utilize this loan amount for its day-to-day operational costs. It will help you to run the business activity without any hindrance of the fund.
2. Long Term Loans
Long-term loan or equipment financial loan, used to fund the expansion or growth of the business, funds the expansion or growth of the business. This loan is available for a longer period. It would require the business as collateral. People use it for purchasing heavy or expensive machinery, inventory, long-term expenses, etc.
Also know: Business Loan Schemes for Startups In India
What are the Features and Benefits of a Startup Business Loan?
Startup loans are different from other financing loans for established companies and have various benefits and specific features.
1. Flexibility: It allows the business owner to concentrate on growth rather than just worry about repayment. It offers flexible repayment tenures for startups
2. Collateral: No collateral is required as startup loans are unsecured business loans.
3. Availability of Funds: Lenders ensure swift disbursal of the fund as soon as your loan is approved.
4. Tax Benefit: The new entrepreneurs will get three years of tax relief.
5. Compared with venture capital, the bank’s rate of return is fixed at a nominal interest rate.
Must read: Best Low Investment Business Ideas
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.