Business finance refers to the fund’s enterprises avail as a credit to acquire raw materials, pay wages, among other functions, in the absence of available liquidity and as a point of investment.
Micro, Small, & Medium Enterprises (MSMEs) often opt for business financing to fund their operations. A commercial enterprise implements financial measures to maximize their production and earn higher revenues from sales.
Business finance can also fuel the growth and expansion of a business unit through the flow of additional capital.
Why does an enterprise need business finance?
In most cases, business owners lack the volume of capital that is required to fuel all sections of business operations. The owner may purchase assets with personal funds, yet may be unable to sustain monthly salary payment to employees.
Business financing reduces the immediate monetary burden on entrepreneurs. The owners of a functional enterprise may use the capital for technological upgradation of the production process, or to establish another production unit. Consequently, business finance can be also be used to boost a slow-moving business.
Another advantage of business financing is diversification. The enterprise may decide to manufacture a new product which will require substantial financial input.
The realisation of capital invested will surely come after a long period. Availing external financing to meet such requirements and to fund all operations related to the new product rollout is vital.
What are the types of business finance?
Business finance is essentially a business loan to ensure the proper functioning of a business. The credit thus acquired can be invested into different capital requirements. The capital classifications of MSMEs are –
Supply chain financing
Individuals can finance the purchase of their raw materials and stocking up inventories using a business loan. Instead of relying on the supply chain for timely payments and investment, enterprises can streamline the financial burden caused by delays in the supply chain.
Entities can consider a guide to working capital loans deal with financial challenges in business.
Entities which sell their products on credit to retailers and customers can avail invoice financing. The funds borrowed on the basis of the amount due prevent disruption in the flow of capital for business operations.
Invoice financing enables enterprises to carry on with the manufacturing and supply mechanisms without waiting for the clearance of the outstanding balance.
Who are eligible for business finance?
Individuals looking for growth in their firms through a steady cash-flow can consider business loans.
Business loan eligibility for salaried and self-employed individuals includes –
- The applicant’s age must be between 25 and 55 years.
- The applicant must have a CIBIL score higher than 750 for better interest rates.
- The business must have been in operation for 3 years.
- IT return document for the previous year.
Documents required for business finance
Business loan documents include –
- Valid OVD KYC of the applicant.
- Address proof with passport, electricity bill, trade license.
- Applicant’s bank account statement for the last 6 months.
- The CA-audited balance sheet of profit & loss of the enterprise.
- Business registration document.
NBFCs like Bajaj Finserv offer business loans of up to Rs.30 lakh to enterprises looking for growth in their firms. These easy loans are customized as per business needs for maximum convenience.
This NBFC also provides pre-approved offers that save time while availing loans. These offers can be availed on numerous financial products including business loans, home loans, personal loans, credit cards, etc.
Enterprises can aim for growth and expansion of their business operations with effective business finance. SMEs and MSMEs in India are progressively considering such loan options as points of investment for better expansion and outreach in a fast-evolving Indian business environment.