Being a self-employed entrepreneur is a good reputation in the community but the problems faced by entrepreneurs from the first day of their business are enormous. It is a great challenge for a person to overcome all obstacles to become a successful entrepreneur. The biggest problem facing everything is money. Even the big business owners of various industries have borne the brunt of many financial problems to establish their own business and to carry out their daily business activities. So finances play a vital role in the lives of business people. Big ideas need the financial support needed to flourish into a successful business.
There are various sources for entrepreneurs to raise money for their business. The most trusted source comes from banks. There are various reasons why people choose banks as the best source of revenue for their business. Banks offer low interest rates in the form of Business Loans. There are different types of business loans with different interest rates to help entrepreneurs solve their financial problems.
Types of business loans:
Businesses are diverse and need money in different stages of their business operations. The need is also different, banks are helping them to provide different types of business loans that help different small and medium businesses to raise money.
New Project Loan – Banks are interested in financing new businesses and new existing business projects. There are different terms for obtaining a new project loan and it varies from bank to bank. A project loan is accepted against a person’s collateral as a residence, commercial property or vacant land.
Existing existing loans – These loans are issued for growth, replacement, diversification of an existing business. These loans are allowed for a short or long period of time to purchase goods, equipment or any immovable property of the company.
Working Capital Loans – These loans are given to a business to solve sudden financial problems and are repaid in the short term. Banks are interested in providing performance loans against their assets, shares or corporate liabilities.
Protected Business Loans – Business loans where companies raise their money against any bank security. It can include real estate, residential or commercial, gold, stocks, debts, insurance as collateral for financing their business. The interest rate is very low.
Unsecured Business Loans – Every entrepreneur cannot guarantee a business loan, so bankers help them with a loan without any security based on bank performance and a tax refund. These loans are charged higher interest rates compared to secured business loans.
There are various steps and procedures followed by banks to provide funding. Procedures and documents to be distributed to banks as follows
Ownership and proof of company – Proof of address and proof of ownership of the corporate or proprietary business.
Legal registration of a company – Even if the company is legally registered under government regulations and follows all legal procedures to establish a business.
Company financial statement – All banks are interested in seeing the company’s one-year business transaction.
Income tax return – ITR helps banks to assess business performance, efficiency, corporate assets and liabilities and corporate taxes from their current income. This also plays a key role in decision-making for a business loan.
Financial Security – Includes the company’s fixed and movable assets that help the bank owner to consider providing a business loan based on the value of the asset and the business activity. This also protects banks from failing entrepreneurs who are unable to repay their loans.
Previous Loan Track – This is a very important aspect that banks look for that will help them assess the financial position of the business and look at the overdue payments on loans.
Litigation – It will help banks to assess the character of an entrepreneur before offering a business loan.
While business loans are available as a good source of income, entrepreneurs face the challenge of getting money on time from banks. To help them get a timely loan, even the NBFC is ready to provide financial assistance for various stages of their business. Banks and NBFC have also simplified the lending process, so all verification is done in a short time, door-to-door collection of documents etc.