Introduction
Expanding a business is always costly. Proper financing is required to upgrade machines, increase staff, or raise the level of production. In this blog, we delve into different sources of funding for small business loans and collateral-free business loans to fuel your dream of growing your business.
Assessing Your Financing Options
But before getting into details on the various types of financing, the person has to consider his own needs. First, one has to identify the reason one needs to raise capital and the end amount required. Second, is it a short-term loan for immediate needs, or is it more of a long-term loan for substantial investments? This analysis will help you decide the best financing option.
Types of Financing Options
Manufacturing business has several financing options. Let’s explore them:
- Small Business Loans
Business loans fulfil the requirements of businesses, especially rapidly growing small and medium-sized enterprises. You can use such loans to finance any requirement, like equipment purchases, expanded premises, or increased working capital. These small business loans generally enjoy quite flexible terms and very competitive rates of interest. The prime candidates for business loans are business owners with a good credit record and who are able to offer some form of security.
- Collateral-Free Business Loan
If you don’t want to pledge your assets, collateral-free business loans are best for you. These business loans are unsecured, which enables you to take a loan without any bond. Interest rates may be a bit higher due to the lender’s risk factor. Still, you can avail of the loans quickly without going through any asset evaluation process. They are most useful for quick financing to businesses with low credit scores.
- Equipment Financing
For manufacturing companies, machines and equipment should always be efficient and updated. This helps increase production and encourages competitiveness. Equipment financing allows one to purchase or lease equipment without taking money off current cash accounts. More often, equipment-backed loans work as collateral. Thus, they have better terms and help retain the business’s liquidity.
- Working Capital Loans
A working capital loan is the right financial product to use in this case for the business’s day-to-day operational expenses. It will help cover the business’s cash flow, staff payment, inventory, and other immediate financial needs. Working capital is generally a short-term loan and is suitable for seasonal fluctuations with flexible repayment.
- Non-Banking Financial Companies (NBFC)
NBFCs offer many financing alternatives to businesses, from small business loans to equipment financing and working capital loans. NBFCs have faster and more flexible approval processes than most banks with competitive interest rates. It is an excellent deal for businesses that want access to funds at a faster pace with less strict eligibility criteria.
Navigating the Application Process
Applying for a business loan requires several steps. Here is a simple guide that allows you to go through the process easily:
- Assess Your Fund Requirement
Determine the exact amount you need and the purpose of the loan. This clarity will help you choose the right type of loan and lender.
- Documentation Required
Gather documents like your business plan, financial statements, a copy of your income tax returns, and a copy of the bank statements. Well-prepared documentation is crucial for speeding up applications.
- Choose a Lender
Identify potential lenders, including traditional banks, non-banking financial companies, and even online lenders. Check the interest rate, terms and conditions, and other qualifying criteria.
- Submit Your Application
Fill out the application form and attach the necessary documents. Some offer free online forms, making the process very convenient.
- Await Approval
Upon receiving your application, the lender will verify your creditworthiness. If the amount has been approved, the amount will be disbursed into your bank account.
Conclusion
Borrowing finance is an essential step in the expansion of any manufacturing business. Loans like small business loans, collateral-free business loans, equipment financing, and working capital loans will help you with your financial needs. Keeping in consideration the fact that NBFCs offer competitive rates of interest, friendly and flexible terms, and a hassle-free application process, they can definitely come in handy in this regard. So, secure the funds to expand your manufacturing business by carefully assessing your needs and efficiently navigating the application process.
