Running a business is not an easy task – there are various external and internal factors that can impact its operations. It is similar to managing different issues of a small country with a tight budget. For a small business owner, it can be a daunting task.
There are various challenges that a business faces in day-to-day life and funding is one of the major ones. However, collateral-free loans provide some respite to businesspeople looking for financial support during the first few years of operations. A business owner can apply for a collateral-free loan without putting up any asset as security.
There are various types of Business Loans that help businesses deal with financial challenges. These include Working Capital loans, Machinery loans, Term loans, and loans under Government schemes.
Business Funding Challenges and Opportunities
Here are a few of the challenges that businesses face and how they can manage them effectively:
- Lack of Financial Expertise
Not all small businesses are able to afford financial expertise during the earlier stages. This makes it difficult for them to manage finances. Financial expertise helps you manage your finances better, so, look for financial ideas that can help you out.
- Selecting the Right Funding Options
There are various funding options available for a small business owner but choosing the most suitable one can be difficult. It is important for a business owner to pick the best funding options for their business. They can go for options like – Angel investing, working capital loans, term loans, equipment loans, cloud funding, partner/venture capital, government schemes, and a bank loan, etc.
- Struggling to Pay Off Debts
Generally, a business owner takes on some form of debt during the initial days of the business. It takes time to generate a stable income and pay off debts. It could be due to the uncertainties of the business and lack of exposure. Nevertheless, any business struggling with this issue should prioritise and focus on timely debt repayment to avoid future troubles.
- Inconsistent Cash Flow
One of the top priorities of a business should be maintaining a positive cash flow. Inconsistent cash flow impacts your cash in hand, employees’ salaries, bill payments, and suppliers. The following are some tips you can use to fix your cash flow:
- Provide invoices immediately
- Prepare & maintain a cash flow forecast
- Minimize the debtor days
- Offer periodic payment packages
- Provide clear payment terms to the suppliers
How to Apply for a Business Loan?
You can apply for Business Loan by following the below-mentioned steps:
- Step 1: Visit the lender’s official website and search for Business Loan
- Step 2: Click on ‘Apply Now’ & fill out the application form
- Step 3: Enter basic details for KYC & provide the documents
- Step 4: Wait for verification & application assessment
- Step 5: Receive confirmation on the successful approval of the loan
- Step 6: Provide approval & authorization for loan amount disbursal
What are the documents required for a Business Loan?
While applying for a Business Loan, you must provide the below-mentioned documents:
- KYC documents like the Aadhaar/PAN Card of the company and key person(s)
- Current address proof (Passport/Utility bills/Rent Agreement)
- Bank statements from the last 3 months
- Business registration proof and business address proof
Note: Please note there can be slight changes in the above-mentioned documents.
How to Use a Business Loan Interest Calculator?
A Business Loan interest calculator helps in calculating your monthly EMIs. It includes:
- Loan Amount – A loan amount is a sum of money that you will receive from a lender after the approval of your loan application.
- Interest rate – The interest rate is the rate charged by the lender for the borrowed amount. The rate of interest differs from lender to lender. Your credit score is one of the major influences on the rate of interest.
- Tenure – Tenure is the time period when a borrower agrees to repay the loan along with the interest.
Ways You Can Use Business Loan Interest Calculator
- Manual Calculator
You can use the below-mentioned formulae to calculate the loan manually:
E = [P x R x (1+R) ^ N] / [(1+R) ^ (N-1)]
- E = EMI
- P = Principal Loan Amount
- R = Rate of Interest
- N = Loan Tenure in months
- Online Calculator
In case you have any confusion about using the manual calculator, you can use the online calculator to figure out the EMIs.
- Step 1: Visit the lender’s official website. Search for the EMI Calculator.
- Step 2: Enter the details such as loan amount, interest rate, and loan duration provided by the lender.
- Step 3: Click on “Calculate” to find out your EMI Amount