do you want to know What are the types of business loan? If yes then this blog post is only for you, after reading this you will get the answer to all your questions easily – Types of Business Loan in English?

business loan It can seem difficult at times. Especially in a dynamic environment like today, as a business owner, you can often find yourself wondering about the best possible way to meet a particular business need.

Business needs can vary between buying land or leasing a factory or shop, or buying new machinery, or working capital requirements, or basic operating expenses such as overheads and salaries. However, it is important to note that there are different types of business loans in India that are best suited for a particular situation.

Here are 10 Different Types of Business for Entrepreneurs in India Loan are available.

1. Term Loan

One of the most common types of business finance is a term loan. The loan can be of secured or unsecured nature. The amount available depends on the credit history of the business. The tenure is fixed, between 1 to 5 years if unsecured, or up to 15-20 years for a secured business loan. A term loan is taken out for a specific purpose, usually for capital expenditure. The lender disburses the sanctioned fund in a lump sum

2. Start-up Loan

A start-up loan is for new business ventures. Applicants for such loans may not have a good credit history at their company as they lack a business vintage. Thus, to judge business loan eligibility, the lender will take into account the personal credit profile of the borrower as well as the company. The current turnover figures and other financials are also considered to decide the loan amount, tenure and applicable interest rate.

3. Working Capital Loan

Working capital loan is a type of small business loan which is taken to overcome the cash crunch to operate the business on a day-to-day basis. This generates a balance in the cash flow needed to run the business. This loan is also helpful in dealing with cash crunch during off-season or to meet demand during peak season. Most of the eligible applicants are service providers, manufacturers, wholesalers, retailers or traders engaged in export and import.

4. Loan Against Property for SMEs

In this the applicant has to mortgage his property to get money for business purposes. The borrower can apply for funds for residential or commercial property. Lenders can finance up to 70% of the current market value of the property. The title to the property should be clean and free from encumbrances. The mortgaged property should also be free from litigation. The tenure of such loans ranges from 15-20 years depending on the terms and conditions laid down by the lending institution.

5. Challan Loan

Invoice financing is also known as invoice discounting or invoice factoring. This type of funding is specifically aimed at small businesses that face a time lag between raising invoices and receiving payments from customers. The financial institution provides funds against the amount raised in the invoice. The lender can finance up to 80% of the invoice amount. Once the business receives the payment, it repays the loan as per the stipulated period and rate of interest.

6. Equipment Loan

It is manufacturing businesses that usually opt for machinery loans. Manufacturing units require expensive equipment to conduct their business and to purchase machines, among all types of business loans, equipment financing is the most preferred. This is because machinery loans are specific in nature, in which the equipment in question is taken as collateral along with some other security. The interest rates can be lower than the interest charged on fixed deposits.

7. Business Loan for Women

Some financial institutions have special plans on business loans for women entrepreneurs. Even the Indian government has taken initiatives to encourage women to set up small to medium sized businesses. The benefits of special loans for women entrepreneurs include a flexible loan amount, start-up The loan includes discounts on standard interest rates and a fast loan process.

8. Overdraft

An overdraft facility is provided against securities or collateral. The lender analyzes the borrower’s credit history, relationship with the institution, business cash flow and repayment history before approving a certain overdraft limit. The borrower can withdraw the required amount and pay interest only on the amount utilized. This way the money can be used as long as the principal and interest amount are paid as per the stipulated period.

9. Merchant Cash Advance

Here, the financial institution provides capital upfront on daily debit card sales or a portion of the credit. The borrower then has to repay the advance with a portion of the daily loan sales. The borrower must ensure that he has sufficient cash flow to manage the payments. The advantage of a merchant cash advance is that the individual has to pay as per the daily sales. So, if the business is slow, the refund amount is also less, and one can pay more when the business is doing well.

10. Business Credit Card Loan

While a business credit card is not the first option that business owners can choose to meet their needs, it is still great for a short-term and immediate funding option. If the business owner needs cash fast, as well as wants to earn rewards against payments made on debt, a business credit card is a perfect option. Many financial institutions attract customers for this type of funding, such as introductory cash back on expense protection/ insurance cover, etc. However, rates can be higher than with traditional business loans.

It is advised that you choose a business loan based on your personal business profile and requirement. The information above will help you as a business owner decide what type of financing is most appropriate for your venture.

Read also:

What are the types of personal loans?

How to take a personal loan of Rs 5000 from Aadhar card instantly?

We hope that after reading this blog post your question is, what are the types of business loans? You must have easily found the answer to this question.