In a new business, there are many challenges that one has to overcome. Be it creating a unique selling proposition or managing the day-to-day needs of
In a new business, there are many challenges that one has to overcome. Be it creating a unique selling proposition or managing the day-to-day needs of a business. However, once the business owner has stabilized their business, they may look to expand their business. During all this planning, one has to determine how they will finance this expansion. Although one can utilize their current finances, it can be a very risky path. Therefore, most business owners opt for a business loan to fund their ventures.
Types of business loans for small scale businesses
To expand one’s business, there are several loan options one can choose from. However, the most common ones are an MSME loan and a shop loan. These loans can help partnership ventures, limited liability partnerships, and individual ventures as well.
These business loans are given to individuals looking to enter into any market. The Micro, Small, and Medium Enterprise or an MSME loan are provided to an individual looking to fund a new venture. Business owners can apply for an MSME loan online, as only a few documents are required. At ZipLoan, a business owner is provided with longer repayment periods and low-interest rates; small businesses can expand quickly and safely. The funding that one receives can be up to 7.5 lakhs to meet the needs of small businesses.
The shop loans are given to small-scale businesses or retail stores. Therefore, Kirana shops, grocery stores, and other small establishments looking to expand their business can avail of these loans. The most beneficial feature of this loan is that it provides some of the lowest interest rates (1% to 2%) without collateral. Therefore, there is not much risk for any small to medium-scale business to take this loan.
How to use a business loan
The loan can be utilized to attain the following:
Meeting the demands of the customer is a priority. This is especially true when the business is established recently or venturing into a new line. Therefore, ensuring that the required inventory or raw materials are available will help the business services customers. For this, the business will have to visit a supplier or a manufacturer. If the demand rises, one will have to send in more orders in a shorter period and, therefore, require more funds.
To make it easier to access inventory, a business owner should also increase the storage area. Larger spaces like warehouses are common options to store goods. In addition to this, the business owner looking to expand their business will also require more shops or retail stores. Therefore, they will look to rent or lease commercial properties in other areas as well.
The increase in stores or the demand for the business products or services will also mean that more staff will have to be employed. Business owners will also have to increase the wages of existing employees to provide better working conditions.
The increase in demand will also require the manufacturing processes to become quicker. This means that the business will have to add machinery or other technology to its processes. If a business has several branches, it will also require devices to commute.
Promotion of business
Another way to ensure that customers know about the business is to promote the business. This is also crucial during expansion since there will be an increase in sales. Therefore, business loans can help to reduce the losses that one sees during this time.
Eligibility criteria to get an MSME loan
MSME loans have particular criteria for eligibility to show that the business owner can pay back the EMIs as per the schedule. The usual MSME eligibility criteria involve:
- The age of the loan seeker and the age of the enterprise.
- Income Tax Returns from the past year
- Some MSME loans differ based on the location of the shop.
- MSME loans require one to have a certain turnover rate.
Business loans like an MSME loan or a shop loan assist an eligible individual in building an enterprise. Thus, these smart loan options allow the business owner to cover their business needs at an affordable deal.