Why and When should you apply for Business Loan

why and when should you apply for business loan

India is home to tens and thousands of micro, small and medium scale businesses. Every business here is distinct in its own way. However, one critical factor that dominates every business here, irrespective of its type and sector – is the requirement for finances. 

No matter what segment the business belongs to, at some point every business will come across the time when it will need to secure funding. And when it comes to procuring business funding then certainly business loans can’t be denied for. Business loans are the most effective tools to provide businesses a quick infusion of capital. 

But taking a business loan isn’t that easy. Finding reasons, for what exactly a loan might be needed for and right time, when, you can’t perhaps do it without a loan- has to be ascertained before you proceed to take out a loan. 

Well, how to decide? To know more let’s dive through this article:

Why a business loan is a convenient option for availing funding 


Business loans are the most convenient funding options. These customized financing products are effective tools that are designed to overcome the business cash flow issues. They can help micro; small and medium scale enterprises meet their short and long term financial requirements. These loans can be considered as reinvestment opportunities for small business owners in India. Available at most competitive interest rates without pledging any asset the business loans serve to be a great source for yielding back profits. Furthermore, the role of NBFCs in recent years has hugely transformed the way business financing processes are performed. Easy borrowing and flexibility have added to the enhancement of the overall disbursement process. Apart from this, the other benefits that strategize the need for business loans include:

  • Simple and fast disbursement for coping with a temporary shortfall in capital.
  • Improving cash flow with easy repayment options.
  • Funding immediate financial needs without collaterals. 
  • Growing and getting business off the ground without undergoing any stringent application process.  
  • Customized funding solutions for meeting specific business demands.


When to consider applying for a business loan


Finding out the “right time” to apply for a business requires a thorough understanding. This is because too early or too late could directly lead to hinder your business growth. 

Then, how to find if the timing is optimally appropriate or not? To help time your movement correctly, here are some of the most appropriate situations that might require you to consider applying for a business loan:

Starting a new business: Not every business aspirant will have enough funds to start or establish his own business. And this is where business loans can help. 

Starting a new venture requires a substantial influx of funding. Everything be it office space, machinery, tools, equipment or hiring staff will require capital to be shored up in advance. Therefore, to kick start your business availing finances through business loans serve to be a crucial source for revenue generation.

Expanding or diversifying business: If your business is booming and you seek to consider its expansion then a business loan can be a great source. Whether opening branches in new locations, adding a new product line, marketing products to a wider audience, hiring new staff or rewarding the existing ones expanding business involves having a lot of cash in hand. In these cases, business loans prove to be very handy. The quick financing coupled with a seamless disbursement process can help your business grow and expand rapidly. 

Purchasing Equipment: Purchasing equipment requires hefty investment – it’s a no brainer!! If your business requires new equipment or desires to invest in more efficient tools then nothing could serve your purpose well than the business loans. Availing equipment financing through business loans can help your business enhance its productivity and profitability. Moreover, if you opt for equipment financing then the equipment itself can be used to secure the funding. 

Purchasing inventory: If your business is seasonal and requires stocking up products in bulk during a particular period then you may need access to extra capital. To meet this surge in demand and replenish inventory with quality products applying for a loan should be considered. The quick disbursement of funds through it can help you ramp up your business sooner and faster. 

Besides this, a business loan can also be availed while reimbursing other business opportunities. These may include purchasing assets, funding working capital, and for building a richer credit for the future.


Why timing matters?


Finding an ideal time to fund business requirements is crucial to the success of a business. Further, to help business owners learn its importance, here are the consequences an incorrectly timed loan could lead to:

  • Too early: Availing loan too early, even before you aren’t prepared or planned could directly affect your ability to repay the loan. Moreover, with less information in hand, you might end up reimbursing payments without investing in essential areas. Thus, this before time funding could also lead to substantial glitches in your financial forecasts. 
  • Too late: Opting for a loan too late could make your business vulnerable to financial crises. It could make it hard for you to manage the business responsibilities and assets. Additionally, it could run you into debt and can bring your business relationships into an endangered position. 
  • Most Appropriate: Getting funded at the right time when you are all prepared to use capital in the right way may ease up your burden of repayment. And could provide your business the needed growth opportunities.




Hence, regardless of the reason you opt for a business loan for, everything boils down to one single factor -making business thrive. Wherever the loan amount is used to invest in the potential returns should always be more than the interest that you pay on borrowed amount. Moreover, the link between business financing and purposes should be established precisely. If the aforementioned factors aren’t considered then the current financial position of the organization may be disturbed. So, before proceeding ahead do remember to conduct a thorough forecast about exactly why, how much and when you need business funding. 

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