6 Different Uses of A Business Loan to Know About

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India’s economic growth between 2023 and 2030 largely depends on approximately 90 million new jobs created in the non-farm segment for a GDP growth of 8 to 8.5%, as per a research suggestion. Concurrently, irrespective of the domain of operation, market expansion through diverse avenues remains one of the essential business goals.

However, to implement this and meet increasing revenue and employment targets, investment in a company’s growth verticals like human resource, inventory, equipment, real estate, marketing, etc. remains crucial. A business loan can thus be an excellent source of capital infusion that fulfils such financing needs efficiently.

  • As per RBI, lending money to small and medium businesses grew by 13.8% from March to September 2020. 
  • Until 25th September 2020, the outstanding business loans increased to Rs.1.2 lakh crore. 

While the purposes of availing such financing vary remarkably, a customised loan for businesses helps businesses address various funding needs conveniently.

6 Ways to use a business loan

  1. Purchase and upgrade equipment

Upgraded tools and equipment are essential to meet increasing production requirements as per customer demand, improve product/service quality, and enhance business efficiency. Nevertheless, if you opt to buy new business equipment, it can weigh in significantly on business finances. 

It is where you can avail a business loan for such purchases and/or upgradation by keeping zero company assets as collateral. Before that, be sure if you should buy or lease equipment for your manufacturing company or when operating in another industry, and proceed accordingly.    

  1. Buy commercial property for business

When it comes to business expansion, purchasing a commercial property often becomes crucial. You can, however, conveniently start a new manufacturing plant, open a new retail outlet or set up a warehouse using a business loan. 

Reputed lending institutions offer business loans with a flexible tenure, enabling hassle-free repayment.

  1. Recruit and train fresh talent 

Increasing production capacity, service quality, and work efficiency are proportionately related to various human resource management strategies, whereby spending on recruiting new employees is one. Cost of such hiring usually involves advertising in online job boards, recruiters’ salaries, training costs, onboarding expenses, background verification, etc., which can be sufficiently met with a suitable financing option.   

  1. Invest in marketing and advertising

Promotion and creation of brand image require innovative marketing strategies and advertising campaigns. For instance, adopting winning marketing techniques for a small spice business can be crucial in reviving this segment’s growth.

Prominent NBFCs in India further ensure simple business loan eligibility requirements and faster loan disbursals, which ease cash accessibility during emergencies.       

  1. Strengthen working capital 

Working capital (WC) refers to the funds used to finance everyday operational costs. There are different types of working capital in a business which need to be managed efficiently for overall operating efficiency.

During low revenue period or fund shortage, businesses can use unsecured credit options to meet recurring expenses like wages, accounts payable, employee salary, overhead costs, etc. The formula for working capital calculation is Current Assets less Current Liabilities. 

Let’s consider this: 

A business’s total current assets are Rs.3,50,000 (cash available) + Rs.1 lakh (raw materials) + Rs.2 lakh (products sold on credit) + Rs.40,000 (obsolete inventory = Rs.6,90,000. Its total current liabilities are Rs.2,70,000 (outstanding payable fund) + Rs.80,000 (unpaid expenditure) = Rs.3,50,000. 

Hence, the WC is Rs.6,90,000 – Rs.3,50,000 = Rs.3,40,000. 

With this indicative computation, businesses can assess their working capital requirements and borrow fund up to Rs.20 lakh from reliable lenders to cover their working capital needs effortlessly.  

  1. Introduce a new product line 

Depending on the business domain, product line expansion brings new opportunities for brand engagement. Introducing a new product using a loan thus offers other perks like –  

  1. Customer retention.
  2. Wider reach of business.
  3. Customisation options.
  4. Overall cost reduction.
  5. Sales and revenue boost.
  6. Risk diversification and reduction.

Leading NBFCs like Bajaj Finserv further bring new business loan eligibility requirements that are easy to meet.

One can also avail pre-approved offers from the lender, which make the loan availing process simplified and less time-consuming. These offers are available on business loans, personal loans, and a variety of financial products. Check your pre-approved offer with name and contact number online.  

A business loan, available as a versatile funding option, can be utilised for a host of purposes. Make sure to assess your financing requirements and prepare a business plan before availing the unsecured credit.

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