Top 5 Benefits of Online Business Loan for SMEs

Online Business Loans are loans that are provided by banks or other private finance companies, for a short period normally for a year (maximum 5 years) and are one-time loans. These are availed by applicants, individuals, or business firms in case they are not able to get a long-term business loan online from a bank. Repayment schedules are shorter in this case and the interest is normally payable on the principal amount that is paid in advance. These are flexible personal loans that are mainly available in two types that is, secured loans where you need to mortgage a collateral and unsecured loans which are also known as collateral-free loans. The eligibility for Online Business Loans is dependent on different factors, out of which, credit history of the applicant is one of the main criteria. These loans solve the purpose of financing day-to-day operations, immediate financial needs, the monthly requirement of capital, payment of remuneration, expansion, and renovation and to run the firm smoothly.

 Features of Online Business Loans: 

  1. An individual – salaried and self-employed or a business firm, both can apply for Online Business Loans.
  2. The tenure for an online business loan is flexible and can be up to 3 years.
  3. A flexible amount of loans can be availed as per requirement, eligibility, credibility, and needs
  4. Variation in Interest Rates as per the credit score of each individual or firm or depending on the amount and tenure of the loan. Comparatively, interest rates could be a little higher than that of personal loans.
  5. Easy and simple process of documentation, application, approval, and disbursal.
  6. Many lenders do not require collateral security or a guarantor in case of Online Business Loans
  7. Loans can be customized as per the requirements of the applicant.
  8. These loans can be applied online with a minimum and simple documentation process.
  9. EMI repayment plans are also customized and flexible as per the ease of the payee.
  10. These loans are perfect for people who could not avail long term loans.
  11. These loans can offer up to a maximum of Rs. 1 crore

 Benefits of Online Business Loans: 

Although these loans are not highly recommended because of their high-interest rates and low tenure, when the need is high and there is no other capital financing option left for the applicant, Online Business Loans are the best choice. Let us look at the various advantages of these loans: 

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  1. Fast and easy cash: A quick access to cash which can be availed only by a few clicks and successful uploading of relevant documents.
  2. Few Restrictions and Flexibility: It is a hassle-free process with not many qualms about the application and disbursal process. in the tenure, loan amount, repayment and prepayment options and the EMIs to be made towards it.
  3. Less Paperwork: It could be an entirely paperless transaction and an extremely quick application process, wherein the relevant documents required can be submitted online and disbursal of the business loan online can be done at your fingertips.
  4. No collateral security or guarantor required in most cases – The applicant can avail of the loan and get funds easily and quickly without getting into the hassles of attaching collateral security or getting a guarantor.
  5. Reasonable interest rates: The applicant has the option to choose from a lot of new-age Fintech companies that offer online business loans at affordable interest rates  

Types of Short Term Loans: 

  1. Working capital loans – Short term loans acquired for working capital can help the applicant in solving day-to-day operational issues like payment of salaries, paying regular bills, inventory and stocking, cash requirement, renovating and repairing, or just filling up the capital to pay for other expenses.
  2. Loan against securities– Instead of liquidating the assets, some applicants may avail of short-term loans by pledging their securities and shares like the stock of the company, insurance, and bonds, debentures, mutual funds, etc. 
  1. Overdraft– This is one of the most common ways to avail of a short-term loan especially for business firms who need instant cash to pay their debts or to enhance their capital. The overdraft facility is provided by banks wherein they allow the individual to overdraw extra money from the bank which is more than the available balance of the customer up to a certain limit for which interest is charged. 
  1. Machinery and equipment loan– Generally this kind of loan is taken by small industries or manufacturing businesses to repair broken machinery, purchase new machinery, technologically update the working of the firm using computers/laptops or printers or to replace or upgrade to a potential new machine.
  1. Flexi business loans– Another popular category of loan in which the interest is charged on the loan amount that is used on a flexible basis wherein the same amount of loan can be used by the applicant multiple times and will be available for him as per his recurring requirements.
  1. Credit card loans– Many credit card companies provide short-term loans on the available limit or sometimes even a higher limit on the duration of about 2 to 6 months with a comparatively higher rate of interest.

The various needs of SMEs that can be fulfilled with the help of an adequate online credit facility made available to them

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With the help of credit availability, SMEs can,

ü Launch a new product in the market and enhance their product range

ü Expand renovation and infrastructural changes in the existing businesses

ü Warehousing and storage needs

ü Employment issues can be fixed like timely salary pay-out, overtime and other remuneration can be easily paid off

ü Purchasing raw material, latest machinery, new equipment, etc.

ü Investment in technology

ü Imports and Exports

ü Credit for enhancing competitiveness by strategic marketing and advertising of their products.

How SMEs help the Indian economy grow and develop with the help of online business loans

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For the overall health of the economy, the contributions made by SMEs are immense and these are just a few ways in which they help and develop the Indian Economy:

  Create job opportunities and employment strategies

  Mitigates the rate of poverty 

  Reduces urban-rural income gap

  Mitigate migration

  Encourage development at every level – local, regional, and state development

  Encourages profitable exports

  Works on sustainability and environmental issues and brings down the pollution levels

  Enhances the output and production

  The purchasing power of people increases and so does the standard of living

  Improves general quality of life 

Online Business Loans have made the entire process from application to disbursal, extremely simple and hassle-free. This encourages small businesses to apply for loans and grow their venture, which ultimately has a positive impact on the economy. 

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