Business Loan

The government of India recently extended the Emergency Credit Line Guarantee Scheme (ECLGS) for Micro Small and Medium Enterprises (MSMEs) by one month until 30th November. This extension was announced by the Union Finance Minister via a series of tweets posted on Twitter.

India is considered to be one of the top breeding grounds for start-ups. Today, it ranks number three in the world in the start-up business category. With immense entrepreneurial capability and passion for business, Indians are entering the start-up genre like never before.

India is one of the major emerging markets in the world at the moment. A major portion of this growth comes from the micro, small and medium enterprises including startups. The SME sector makes up nearly 40% of the total GDP and is a major source of employment for the growing population of India.

Businesses need to raise funds at different stages, sometimes even after the initial expenditure of setting up a business is met. It may require additional capital for smooth functioning.

Running a small business is deeply satisfying – it’s the path to pursuing one’s dreams and passions. However, owning a business isn’t a piece of cake. There are plenty of challenges and hurdles to cross.

You have a great business idea. Now, you want to start executing it. The first hurdle that you're likely to come across is – lack of funding. Capital is the bloodline of any successful startup venture.

Most businesses – irrespective of their size, nature, or industry – have to borrow money at some point in their lifecycle. Be it to get off the ground, expand operations, or to weather a rough patch – borrowing is a crucial and essential part of all businesses.

The growth of a business is hugely dependent on the continuous flow of funds and that may be required to fulfil an order, purchase equipment, expand the business, pay to the workforce, etc.

Debt vs. Equity Funding: Analysing the Pros and Cons for Startups

Obtaining the necessary credit at the appropriate time is crucial for any business endeavour. Initial capital and working capital are required to run any industry smoothly. Large scale industries have never had any difficulty in securing credit for their enterprises, because of the perception that they offer the highest employment opportunities to the general population.

The National Minorities Development & Finance Corporation (NMDFC) has numerous financial funding schemes in place to encourage entrepreneurs from the Minority population in setting up their business units. One such scheme is the Term Loan Scheme – Credit Line 2 under the Self Employment Lending Scheme.

All businesses require steady cash flow to maximise growth opportunities. One of the biggest hurdles faced by micro, small and medium enterprises (MSMEs) is that it’s difficult to get business loans from traditional lenders due to lack of collateral and other assets.

A business loan is one of the biggest financial commitments you will have in your life, which means you should be prepared to bargain for the best offer. In India, there are many banks that offer term loans, small business loans and many of them are negotiable. Therefore, you will have to negotiate for the best during the loan process.

Having a strong business concept and the passion to drive this business plan into reality sets the foundation to run a successful business. Another factor that is as important to run a business is money. With many lending institutions offering a lot of credit options, it is not difficult to get a business loan. But the difficulty to get any loan approved by the lender is when you have a bad credit score.

Start-ups and entrepreneurship are buzzwords in current times. It may be a hobby or passion that takes the form of a business, or it may be the need to solve a customer pain point; there can be many ways of starting off. Initially, every venture starts off small. It's only with a lot of perseverance and hard work that a business scales heights.

Being in debt is common and there is no shame attached to it. Anyone can go into debt at some point in life, including the rich. Not all debts are bad; some debts can be taken for your investments such as a home or plot, and some can be unavoidable such as medical emergency or mandatory financial obligations. Whatever they may be, it requires a meticulous financial strategy to pay them off without any hassle.

No matter how successful an idea is, a business needs finances to grow, expand and make the venture profitable. Businesses can be of two types: one that produces goods for sale and the other that offers services to its customers.  A good example for the production-based business could be companies producing anything from airplane to a pin, while service business could be anything like a courier or a food delivery service.

A household or an individual needs credit to fulfill some of their needs and purchase certain high-value assets. What holds good for an individual holds good for an enterprise or a business too. A business needs finance for both short term and long term growth. The funds needed for running the business may come from various avenues like promoter's own funds, venture capitalist, angel investors, from public funding or from loans, etc. 

According to Global Entrepreneurship Monitor (GEM) report, the entrepreneurship levels are stable and increasing gradually across the globe. There are about 100 million start-ups launched every year worldwide. With the easy access to business loans from banks, NBFCs and online lenders, starting a new business is possible for anyone who has the determination to succeed as an entrepreneur.

Establishing and running a business require continuous inflow of cash, both for long-term and short-term use. There are different avenues of financing available for a business owner depending upon their need; be it the duration of financing required, interest rate charged, the ease of obtaining the finance, etc.  

Finance is crucial for building any business. As a business grows, so does its need for finances to meet its requirements. All the finance required for building a business cannot be brought in by the promoters alone. Hence, there arises a need for credit.