A business loan is only intended for business purposes. Similarly to all loans, it involves debt, which should be paid with added interest at a given time period with certain terms and conditions imposed by the lender. These loans are generally taken to fund the business capital, expenses in setup, or for expansion of business.
A business loan is taken by the companies if they cannot finance the business expenses on their own. The borrowed amount can be used to pay salaries to the employees or wages to the workers, expansion of business, capital required for startups.
Business loans allow the companies to have a chance of success. These business loans are at a high demand and therefore not all the companies will receive the loan. The lenders check and evaluate the company history, the amount of debt the company has and whether the business has the sources to repay the amount with interest rate with the given time period.
Small and Medium Enterprise (SME) Loans
The small and medium enterprise (SME) loans in India has grown tremendously over the period of decades, providing employment opportunities to millions of people around the country and bringing several industries to the backward areas. This sector provides employment for people all around the country and function as subsidiaries to large industries in the country.
SME loansis the funding of small and medium-sized enterprises which represents a major function of the general business finance market in India – in which capital for several different types of firms are supplied, acquired or priced. Capital is supplied through the business finance market in the form of bank loans and overdrafts; leasing and hire-purchase arrangements.
However, not all business finance is commercially supplied in the market. Much finance is internally generated by businesses out of their own earnings or is supplied informally as trade credit.
Small and Medium Enterprise (SME) Loans Benefits
SME loans have the following advantages: