Why is Business Loan Ideal for Your Startup?
Starting a business is a dream come true for many. The number of startups in India has grown seven times to 50,000 in a decade. It clearly shows that the country has better exposure to technology and access to funds. The VC industry is growing at a fast pace, which has made the availability of funds quicker and convenient. But it’s quite challenging to raise seed funding. Not every startup is fortunate enough to get funds from a VC right from the launch. There are times when capital becomes a problem, and the expansion of the business comes to a halt.
Bootstrapping is ideal in the first few stages of growth, but if you are looking for large scale expansion, you will need additional capital. An option to introduce new capital in the business is through a Best business loan. Here are some of the reasons you would want to consider a business loan for your startup.
Your startup is ready to take the next step, and you are looking to expand the line of business, but you do not have enough investment for it. There is the location, ideas, equipment, and personnel but not enough budget. This means the business is growing, and a business loan will be beneficial. This loan will help you grow your business in terms of output, expansion, and revenue. You will be able to get a better location or a bigger space, increase output, and hire more employees. Before you apply for a loan, you will have to do forecasting and estimation so that the loan amount will not disrupt your budget.
2. Buy new equipment
Every business needs equipment and machines to perform efficiently. You will need to invest in the latest technology, and lack of equipment could become a hindrance if you want to expand. The cost of machinery can refrain a business from expanding production. Many entrepreneurs are not aware of the benefits of a loan, and they postpone the business expansion plans. You can take out a loan for the financing of equipment, and the same equipment can also serve as collateral for the loan. Equipment financing is available for new and refurbished machinery.
Inventory is a crucial aspect of a business and is also the most significant expenses when running a business. It could be a tricky area in the industry since many do not have the expertise on how much to invest in the inventory. There are times when a huge sum of liquidity remains blocked in inventory holding idle production and there will also be times when there is no inventory to meet the production demand. Projections are essential for measuring the right amount of inventory based on the sales and production of the past year. In order to manage the right amount of inventory, business loans are quite fruitful.
4. Working capital needs
Every startup needs working capital to run everyday operations. Many businesses have a high working capital requirement and need external help with the same. There are lenders who offer special loans for working capital in order to enhance the business operations. With the expansion of the business, you can pay off the loan or even make a prepayment if the terms of the loan allow.
5. Hire expert professionals
There could be times when the business is going very well but there is not enough professionalism or expertise. An expert can make a significant difference to your business and it could be a turning point in your business. At the time of incorporation of the business, you wear a number of hats but there will come a period when you need to hire people to manage accounting, marketing, and business planning. You will have to focus on innovation and production while the other aspects can be handled by professionals. This is when your team will have to expand and you will consider investing in talent. A business loan will help you manage the issue and you will be able to attract professionals and highly qualified talent to your startup.
6. Business opportunities
A good opportunity can come and go in a blink and if you get a chance, you need to make the most of it. Your opportunity could be to make an investment in new machinery or get a good bargain for a big order of raw materials. You can advertise the product during the festive season but the lack of funds could disrupt your plans. At this point, it is ideal to take a business loan and make the most of the business opportunity. Since you are expecting growth, it helps to take out a loan.
7. Keep your equity
Raising funds through equity is a very common method in the startup industry. However, the problem with this form of funding is that you give a part of your company’s shares to the investor and at times, it means giving up a huge amount to the investors. If you are in need of funds but also want to keep your equity, business loan is the best option for you. You will be able to have funds that fit your terms and conditions and you will not have to give up on your equity. A hdfc business loan is the best way to secure funding for your business. It has an easy application process and quick approval. However, it is important to take into account the interest and principal payment that you will have to make over the tenure. If you can manage to pay the loan without any default and still have a good profit stream, this is the best financing option for you. Check the eligibility criteria before you apply for the loan and choose a lender that best fits your needs. A business loan will help turn all your dreams into a reality and will help take the business to its potential.
Originally published at https://www.ourfinancenews.com on July 1, 2019.