Many small business owners are against debts because they don’t think they have enough CIBIL score, or unsure if they can afford repayments. But one cannot deny the fact that investment is important to grow any business. Businesses would need finance for various reasons like upgrading equipment, buying inventories and working capital, these’re the most common reasons.
Read on for a look at five unheard reasons for which an entrepreneur might take a business loan.
To Pay Taxes:
Business owners must set aside enough amount throughout the year before the Tax officials knock on the door. But business doesn’t always work according to the plan, which is why entrepreneurs often take a loan to pay off taxes. After all, paying it off on time using a loan is better than getting in trouble with the Tax officials.
To Buy Insurance:
Insurance is one of the major business expenses and some business owners take a loan to invest in multiple insurances. There’s a benefit in getting your business insured; It is one of the eligibility criteria when you apply for a long-term loan which includes huge loan amount.
Business owners could need a loan if they’re hiring an advertising agency to market their products. Marketing is often a huge expense and costs a lot of investment, though it eventually pays off in the long run.
To Refinance Another Loan:
Taking loans to pay off another loan may seem strange. But business owners do it when they get another loan for better rates and benefits. In fact, it is a popular and sometimes necessary reason to take a business loan.
To Cover Unpaid Invoices:
Another reason why entrepreneurs need funds is when there are outstanding invoices. When there are daily expenses and inventory costs which you need to pay off, you certainly cannot put it on hold until your clients settle the due amount. This situation can demand a loan to settle the obligations.
Here’re the most common types of business loans. You can find one that suits your requirements:
Crowdfunding – Raising a small amount from a large number of people.
Small Business Grant – Free funds granted to micro and small businesses by the government.
Working Capital Loan – Funds to cover daily operating expenses in a business.
Business Line of Credit – A credit facility in which you borrow a certain limit and pay interest only for the amount you use.
Short-Term Loan – An instant loan for your temporary working capital needs. This loan needs to be paid within a year.
Business Credit Card – Credit facility based on the transaction record of the Credit card.
Equipment Financing – Some banks provide loans to help you upgrade your equipment.
Business Expansion Loan – A large fund for business growth which is usually repaid over 5 or more years. Interest rate for long-term loan is quite low compared to other loans.
Credit Score is no doubt one of the most critical parameters for getting a loan. Also, the banks ask for a minimum of three years of business proof or other factors such as educational background, age, residence stability etc. So, save yourself from all these hassles of getting a loan by choosing an innovative way to get instant funds. POS or Credit Card based loans are the best option for any business when it falls short of working capital or when there’s a financial emergency. NeoGrowth provides simple lending solutions that address your urgencies with more efficiency.