Capital Finance Loan: Why it is Most Popular in the Business Industry?

Importance of Capital Finance Loan in Business Industry

A significant portion of the Indian businesses looks for credit options when it comes to fulfilling their working capital needs.

Data suggests that around 25% of the working capital gap is fulfilled by companies, while the remaining comes in the form of loans. In most cases, however, financial institutions shoulder even greater proportions of the same.

Thus, it is evident that business finance is crucial for companies to thrive today. It acts as a source of liquidity whenever an enterprise suffers from cash flow issues.

Nevertheless, companies should have a better understanding of the benefits of such loans.

Why your business needs capital financing

Listed below are six pointers that should explain why a capital finance loan is indispensable for most small and medium enterprises.

Meeting short-term needs

All businesses have certain requirements, which can have a lasting impact on their operations in the future. For instance, a restaurant may need to acquire better technology to take orders digitally.

Similarly, a textile company may require financial assistance to clear its dues to suppliers. While these are all short-term needs, they are essential expenses for the smooth operation of a business.

Hassle-free financing from lenders can aid in meeting these needs effectively, without creating an excessive financial burden on the business in terms of repayment.

No need for collateral

In most cases, business finance tends to be an unsecured form of credit. What this means is that an enterprise can avail such a loan without needing to hypothecate an asset in return.

Business owners can retain all of their properties and assets when opting for these financing options. 

Nevertheless, one should weigh the pros and cons of a business loan without collateral before applying. Doing so should help understand whether unsecured credit is the best option under its current circumstances.

Quick approval and disbursements

Business loans to fulfill capital needs tend to have a streamlined application procedure. Furthermore, NBFCs usually approve and disburse such loans in a matter of hours.

Therefore, companies suffering from a sudden financial emergency can easily approach lenders with an application, ensuring fast access to cash. Bajaj Finserv, for instance, offers hassle-free funding to businesses within 24 hours of application.

The NBFC also provides pre-approved offers to simplify the process of availing a loan, also making it quicker.

These offers are available on an array of financial products like business loans, credit cards, personal loans, and much more. Individuals can check their pre-approved offers by simply providing their name and phone number.

Significant loan amounts available

Businesses can experience significant shortfalls due to unforeseen losses or other factors. If such a thing happens, they need to be able to rely on business finance options to recover most or all of the loss.

Thankfully, most lenders are ready to provide considerable credit to eligible applicants. Reputed institutions may offer as much as Rs.30 lakh to deal with liquidity shortages.

No end use restriction

The lender does not have a say regarding how a company plans to spend the proceeds of a capital loan. A business reserves complete right to use the funds any way it deems fit.

Furthermore, companies do not need to disclose the reason for borrowing to the lender as well. Other lines of credit do not warrant such freedom.

Non-collateralized lending

Business credit is largely unsecured in nature. Such facilities ensure minimal hassle to enterprises, especially if they can stick to the repayment schedule.

While a new or budding enterprise should rely on other sources for its capital requirements, financial institutions remain one of the most dependable funding options to raise capital. To maximize the benefits of such borrowing, one should look at all relevant features.

Comparing the various offers available can also help in determining the most suitable loan option for a company.

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