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How To Secure A Short Business Loan? Check This Detailed Guide

mahindra-finance-author

by Mahindra Finance

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April 22, 2024

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4 mins read

Are you an entrepreneur looking to take your business to new heights? Or perhaps you're a small business owner in need of funds to cover operational expenses. Whatever your situation may be, securing business finance is crucial for growth and sustainability. 

Business finance plays a vital role in guiding businesses towards smart financial decisions. It not only helps cover expenditures like machinery and operational activities but also fuels growth and profitability. Whether you are just starting or have been in business for years, maintaining a steady flow of funds is essential for success.

In this blog post, we will guide you through the process of obtaining funding for both short and long-term business needs.

But why is business funding so important? Let's explore some key reasons

1. Achieving various targets

Every business sets goals for both the short-term and long-term. However, a lack of liquidity can hinder growth. By securing external funding, businesses can ensure they have sufficient working capital to meet their objectives.

2. Planning short-term and long-term activities

While short-term resources are useful for immediate needs, long-term projects require dedicated funding through options like bank loans.

3. Meeting financial goals

Whether it's increasing sales financing or expanding manufacturing capabilities, securing business finance is crucial.

4. Analysing financial statements:

Financial statements provide insights into a business's revenue cycle and overall financial health. Adequate financing allows businesses to make informed decisions regarding expansion, recruitment, marketing, and more. 

Different sources of business funding

1. Angel investors:

Angel investors are individuals or groups willing to invest in potential businesses. They not only provide finance but also offer guidance and consultancy services.

2. Crowdfunding:

Crowdfunding is an online resource where potential small businesses and startups can pitch their ideas to a group of investors.

3. Partnership and ventures:

Partnerships with other firms can provide capital for small businesses. The resources of partner firms align with those of another firm in the partnership.

4. Government schemes:

Various government schemes collaborate with lending authorities to provide financial assistance to micro, small, and medium enterprises (MSMEs). 

5. Bank loans:

Banks offer loans to small businesses based on their credit history and collateral.

Short-term business loans

Short-term business loans are designed to cover immediate financial needs such as inventory purchases, payroll expenses, or unexpected emergencies. These loans typically have a shorter repayment tenure and are easier to obtain. 

Here are some types of short-term business loans:

  • Working Capital Loans
  • Invoice Loans
  • Credit Lines

The credit line is a short-term business loan suitable for managing short-term cash flow fluctuations.

Long-term business loans

Long-term business loans are meant for larger investments like purchasing machinery, expanding infrastructure, or funding growth plans. These loans usually have longer repayment tenures and require collateral. Here are some options for long-term business funding:

  • Term loans
  • Equipment loans
  • Corporate loans

Conclusion

Securing business funding for both short and long-term needs is crucial for the growth and sustainability of any business. By understanding different funding options, calculating business loan EMIs, and exploring various sources of finance, you can make informed decisions to support your business goals.

As you embark on your financing journey, Mahindra Finance can be your trusted partner. With their range of business finance solutions, including short-term loans and long-term business loans, Mahindra Finance offers tailored financial support to meet your unique needs. Visit the website to explore the offerings and take the next step towards growing your business.

FAQs

Q: What are the eligibility criteria for business loans?

A: Eligibility criteria for business loan may vary depending on the lender. Generally, lenders consider factors such as credit history, collateral availability, cash flow stability, and business performance.

Q: Can I apply for a short business loan if my business is relatively new?

A: Yes! Some lenders offer short business loans specifically designed for new businesses. However, eligibility requirements may differ from traditional loans.

Q: How can I improve my chances of getting approved for a long-term loan?

A: To improve your chances of approval for a long-term loan, maintain a good credit score, have a solid business plan, provide collateral, and demonstrate the ability to generate steady cash flow.

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