If you are someone who is trying to start a
new enterprise then raising funds is probably giving you sleepless nights
already. There are numerous options of financing business operations like
raising equity, own savings, taking help from relatives, credit cards and
crowd-funding. But all these methods have their own limitations. Let us first
address the factors that might necessitate availing a loan:-
·
When free lines of funding are
not available;
·
Where continuous line of
finance is required over an extended period;
·
Existing modes of cash flows
are not enough to fund the business operations or stock inventory;
·
You are confident that business
will generate enough funds to repay the business loan as and when the EMIs get due;
·
Cost of loan is really low and
its benefits outweigh the disadvantages and its limitation.
Now let us move to answer the big question-
why it makes sense to take loan for a start up?
1. Tax Saving
Interest on loan can be claimed as a
deductible expense from business income and thus it helps in saving tax.
Therefore, effective rate of interest should be arrived after deducting the tax
savings.
2. Ownership
Many start ups end up engaging venture
capitalists who invest their money in start ups and in return become part
owners of the business. The advantage here is definitely the cost part which is
nil but the flip side is sharing ownership for want of funds. Such sharing in
ownership dilutes autonomy and may lead to many restrictions in the way
operations are carried out.
3. Hassle-free and easy
The process and procedures related to
business loans have been simplified over the years. More and more lending
agencies are designing and customising their loans for start ups and are
readily lending them too. For more on business loans for your start up, you can
visit Letzbank that offers a wide
range of loans from the most trusted names in the lending sector. The
comparative display gives clear visual on rate, tenure, loan amount and other
processing charges being offered by lending institutions that have collaborated
with letzbank.
4. Special schemes for women
entrepreneurs
These are particularly good times for women
entrepreneurs to start their own dream project with loan funding. The
government and numerous banks are introducing programmes and products
especially built for the independent women of India. Some notable schemes that
have gained popularity are Stree Shakti package by SBI, Annapurna scheme by
BMB, Dena Shakti Scheme by Dena bank, Udyogini scheme from Punjab & Sind
Bank, Cent Kalyani scheme run by Central Bank of India and Mahila Udhyam Scheme
introduced by SIDBI. For details on these schemes and products, do read our
detailed write up here .
Business loans are vital to health and
sustenance of a venture, over a long period of time. They also have various
advantages over other kinds of funding options. Earlier only established
businesses could successfully avail business loans from reputed institutions
but now the scenario has changed with changing economic progress that has been
partly fuelled by start ups. This is why there could not be a better time to
raise a loan for a freshly budding start up!
