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So, What Exactly is a Commercial Loan?
A loan provided to a business by a financial institution such as a bank or a lending company is known as a commercial loan. It is used to cover capital expenses or operational costs, which the company otherwise wouldn’t be able to afford.
Due to high upfront costs and some regulatory hurdles, small businesses are often prevented from having direct access to equity and bond markets for financing. This often leaves smaller businesses to rely on lending products such as unsecured loans, a line of credit, or term loans.
Why the need for Commercial Loans?
Small businesses that have already built a strong footing in the market can now move on to the next stage, which is an expansion of the business. With an established business model and good transactional history in place, one can utilize a commercial loan to expand the business. Small business owners can also look at the possibility of expanding across geographical locations or a new target audience.
- Equipment and tools
Science and technology are changing every day. The quality, overall output, and productivity of a business can be enhanced greatly with the newer technologies and tools. Small business owners can take advantage of commercial loans to invest in new technology that would give them a competitive advantage.
Read More: Machinery Loan for Business
- Inventory management
Sometimes, small business owners hesitate to take up big orders. Big orders mean having enough raw materials which are available in a ready-to-use state. Commercial loans can come in handy here. Small business owners can avail of commercial loans to buy the necessary inventory much ahead of time.
- Increase working capital
The cornerstone of any successful business be it micro, small, medium, or large is to have healthy working capital. It is critical for a business to have the healthy working capital to survive. Unforeseen payment delays by customers can be avoided if a commercial loan is availed to balance out the adverse financial implications.
- Consolidate Debts
Small business owners can consolidate all their smaller debts into one single EMI. This not just reduces the strain on your monthly budget but also helps in keeping track of your debts. There is also an option to expand your repayment schedule for up to 12 months, which means that the chances of you reducing your monthly EMI amount are high.
How do I know if I am eligible for a Commercial Loan?
If you can fulfill all the below requirements, you are all prepared to apply for a commercial loan.
- The business must be in operations for more than six
- The minimum turnover of Rs. 90,000 or more should be fulfilled three months before submitting your loan application.
- The business should not be on the list of negative locations.
- The only businesses that are not eligible for commercial loans are trusts, NGOs, and charitable institutions.
Contact us in case your business falls under the restricted category or location, to confirm if you are eligible.