Starting a new business with a small operating or working capital might subject the company to several challenging situations. Once you have a business idea, it is also important that you see it through to fruition. A business also needs some essential funds to get going smoothly. Even if a company is earning continuous profits, it might lack proper flow of incoming cash. Unforeseen expenses can occur at any time as your company develops. Hence, it is essential to maintain the cash flow with careful planning, to keep your business growing.
If you are starting a business with small capital, your business model and personal cash is the only thing which would keep you sailing. However, there are many small business loans offered by lending authorities which can help you deal with cash crisis.
Availing a Working Capital Loan
Working Capital loan is one of the most popular loans availed by many businesses with small capital. Small companies tend to invest a lot in their fixed assets like machinery, fixtures, land and office premises. However, they usually face issues with the availability of liquid cash to maintain the cash flow, paying off regular bills and other operating expenses including the business capital. Working Capital loan can help in dealing with seasonal gaps, gathering funds for equipment, and also managing the daily expenditures. Healthier liquidity of cash is essential to keep your business afloat.
Advantages of a Working Capital Loan
- Working Capital loans are unsecured business loans which means you don’t have to keep any of your equipment, tools, or machinery for security.
- These loans generally have very short tenures of repayment which eliminates the aspect of long-term planning of regular installments to pay it back. The credit can be repaid back in less than a year.
- Disbursement of the money can be done in just a matter of days after completing the process of assessing the creditworthiness of a firm.
- EMIs can be customized as per your preferences, and hence there is flexibility in repaying the loan.
Selecting the Type of Loan for Your Business
There are some other loan options available for business with small capitals:
Corporate and Term Loans
These type of loans are for either starting or expanding a low investment business which is purchased in significant amounts and is to be repaid on a long-term basis. These loans are offered against the security of fixed assets with a variable rate of interest and various tax benefits.
Government Small Business Loans
Credit Guarantee Scheme is a scheme started by the Indian Government in partnership with Small Industries Development Bank of India. Under this scheme, Micro and Small Enterprises can avail unsecured business loans. These loans can be purchased at a maximum amount of 100 Lakhs. Stand Up India scheme is primarily designed for providing financial assistance to the female-owned businesses of Scheduled Caste and Scheduled Tribes. These loans can be purchased by companies involved in any sector with the minimum amount being 10 Lakhs and maximum up to 1 Crore. The repayment tenure for these loans is seven years.