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About Business Loan

Business loan is a credit facility offered by NBFCs and various other financial institutions to meet the business requirements of individuals, self-employed customers, business owners, MSMEs, and other business entities.
Business Loan can be availed by startups, entrepreneurs, retailers, traders, manufacturers, self-employed professionals (CAs/Doctors), existing businesses, and several other business entities.

Business loan is majorly classified into two types, such as Secured loan and Unsecured loan.
Secured loans are types of loans that require collateral/security, that borrowers need to deposit with the lender to avail funds.

Term Loan

Term loan is offered under various types, such as short-term loan, long-term loan and other small business loans. The loan amount offered under term loan depends on the applicant’s profile and business requirements that can be repaid in 12 months to 5 years, in the form of EMIs. Term loans are divided into two parts, unsecured business loans, and secured business loans. Secured loans require collateral to be submitted with the lender, which is not the case with unsecured business loans.

Working Capital Loan

Working capital loans are availed to meet the day-to-day business requirements or to manage business cash flow. The working capital loan can be availed for various other purposes, such as business expansion, buying equipment or machinery, purchasing raw materials or goods, paying off salaries or rent, enhancing inventory, and much more. Usually, the repayment tenure offered by most lenders is up to 12 months which shall exceed as per business requirements and the sole discretion of the lender.

Bill/Invoice Discounting

Invoice discounting is a financial instrument offered by NBFCs. Bill Discounting is a source of working capital finance for the seller of goods on credit. It is a discount that a financial institution takes from a seller’s customer. Through the payment being made by letter of credit, the buyer has the option of buying goods from the seller. Bills that come under bill discounting are termed Bills Of Exchange.

Letter of Credit (LC)

Letter of credit is a payment instrument used mainly in international trade in which the bank provides a monetary guarantee to enterprises that deal in the import and export of goods. Enterprises doing business overseas have to deal with unknown suppliers and they require assurance of payment before performing any transaction. Therefore, a letter of credit is important to provide payment assurance to the suppliers or exporters.