Finance is the heart and soul of any enterprise. It plays a vital role right from the establishment of a business to play an important role in driving its growth. Today, business finance has come a long way from traditional methods of financing. Let us understand more about this topic:
Business finance refers to funds availed by business owners to meet their needs that may include commencing a business, obtaining top-up funds to finance business operations, obtaining finance to purchase capital assets for the business, or to deal with a sudden cash crunch faced by the business. Prominent loan providers have your back and provide finance to cater to the needs of your business.
The importance of finance cannot be sufficiently stressed. A couple of advantages of obtaining finance can be described as follows:
The major types of business finance are outlined below. You can evaluate each type and assess the suitability for your business:
Must Read: 10 Types of Business Loans in India
Obtaining finance can be intimidating for entrepreneurs. It is a decision that should be taken with caution because it is bound to leave a deep impact on the finances of your business. In such a situation, exploring various sources of financing is extremely worthwhile. Finance can be classified based on various parameters and it is completely up to the entrepreneur to choose the right mix of finance for his business.
The various sources of funds can be classified into two main categories:
Internal funds are generated by the owners of the enterprise in form of preference shares, equity shares etc. It helps owners retain their control over the company in form of shares and therefore drive the major decisions relating to the company. It also helps them avoid taking on debt. However, this type of funding is possible only if the owner / promoter has sufficient funds to avoid approaching lenders or investors.
Loan providers insist on a few basic documents to evaluate your eligibility for a business loan. The business loan documents required include a copy of your KYC documents, a copy of your address proof, latest bank statements, proof of income and documents to prove the existence of your business. If the loan amount you seek is higher, you may also have to pledge collateral such as property or financial assets, and documents pertaining to these will also be required. Log into the website of your loan provider or get in touch with a customer care representative to obtain a complete list of the documents required to process your application.
Confused about how much money you are eligible to borrow for your business? A business loan EMI calculator can help you calculate the approximate amount you can borrow while ensuring that EMIs payable do not eat into the operating expenses of the business. If you do decide to opt for a business loan, make sure that you repay the instalments on time to make sure that you continue to maintain an excellent credit score in the long run.