The business loan meaning is a loan product offered to business
owners who have a running company but require external funds for
operations. The investment cover expenses such as employee salaries,
rent, buying equipment, or expanding the business in other cities.
Lenders
analyze the business owner's creditworthiness through factors such as
credit score and business turnover. However, entrepreneurs or business
owners are legally bound to use the loan amount only to cover business
expenses and not use the loan amount to cover personal expenditures.
Repayment
is also a factor in the business loan definition, as the lenders charge
interest on the principal amount the borrower must repay in full within
the loan tenure.
Types Of Business Loans
No business has a
similar capital need as they belong to multiple industries and sectors.
Lenders ensure that they effectively cater to the capital needs of
every type of business through specialised business loans. Here are some
of the most common business loans available to business owners in
India.
Term Business Loans:
They are straightforward,
short-term loans without additional benefits. Such loans have a short
loan tenure of 1-5 years. These loans require the borrower to mention
the purpose of the loan, and the amount sanctioned is based on the
business credit history.
Working Capital Loans:
Similar
to term loans, working capital business loans are also short-term and
come with a tenure of 1-5 years. However, business owners avail of such
loans to fulfill short-term and current liabilities such as daily or
approaching expenses such as rent or employee salaries.
Commercial Business Loans:
Commercial
business loans cater to the capital needs of businesses with high
turnover. These loans offer immediate capital up to Rs 50 lakh with a
3-5-year tenure. The loan is for enterprises that have been at least
running for a year and are profitable.
Startup Loans:
As
startups have become widely popular in India, lenders offer startup
loans to entrepreneurs who want to expand their current businesses.
These loans do not require pledging any valuable asset as collateral and
offer repayment flexibility to budding entrepreneurs.
Equipment Financing:
This
business loan allows business owners to raise immediate capital to buy
equipment such as machinery or the latest technology. However,
entrepreneurs can also use the loan for other business expenses.