At some point of time or the other, every small business encounters the need of raising funds to keep the business float or to prepare it for expansion. However, when it comes to quickly grabbing a golden growth opportunity, waiting for an investor to make an investment, or looking for traditional modes of arranging funds may not be beneficial. Instead, in such situations, a small business loan can prove to be of immense help. Nowadays, they are many lending institutions that have started acknowledging the potential of small businesses by offering them well-customized loans with flexible terms and conditions.
One of the most important benefits associated with such loans is that they do not demand any asset in the form of collateral. In addition, whether you require funds for stocking inventory, hiring staff, or scaling up the operations, the lender does not impose any restriction on the way you use your funds. Moreover, since they are usually collateral-free, the application process is simple and quick. If you are still not sure about taking these loans, here are few well-detailed reasons that you must take a look at.
Few Reasons Why You Should Consider Taking Small Business Loans
- Low interest rates – Needless to say, small business loans are obtained by SMEs which do not have much money to pay in the form of EMIs. Hence, by keeping this point in mind, the lenders provide the loan at low rates of interest in order to make the whole loan highly affordable for the borrowers. However, they strictly consider your credit worthiness, financial stability, and ability to make the repayments while deciding the interest rate.
- Tax benefits – A noteworthy advantage of taking a small business loan is that the borrowers get to enjoy tax benefits. As per the government rules, there are several sections under the Income Tax Act which state that the amount of profit used for repaying the loan amount is absolutely exempt from tax.
- Highly flexible repayment structure – To support the growth of small businesses, the lenders offer a highly flexible repayment structure, so that the borrowers can easily make the repayments. Along with offering the freedom to decide the EMI amount, the lenders also allow you to choose a suitable repayment tenure.
- No interference from investors – When a small business owner approaches and welcomes investors in his business, he not only raises the required funds but also becomes liable to share the decision-making process and several other rights with them. But this does not happen in the case of small business loans as the lender does not interfere with the way you run your business.
- Collateral-free – While scouting the markets, the borrowers may come across many of the lenders that provide small business loans without demanding any asset in the form of collateral, further making the whole application to approval process absolutely convenient and hassle-free for you.
To wrap up, a small business loan can prove to be highly beneficial for those small-scale businesses that require an influx of funds in order to seek growth. Such loans are collateral-free in nature and are provided at low interest rates to deliver complete support to the borrowers. Also, as stated above, the borrower can avail of several tax benefits by taking these loans.