Guest Post – Grow Your Business with Business Finance
Ensuring proper cash flow in business is your first priority. Here are a few ways you can grow your business with Business Finance.
Business finance involves bringing cash flow into your business setup in a way that will help you expand your business. Business finance is of two types, namely debt finance and equity finance. Equity finance is when you find an investor who is ready to buy a stake in your business and share the pros and risks of the business along with you. Debt finance is when you borrow money from a lender, and pay interest on your borrowings. Both debt and equity finance have various ways of financing your business, with each one having its own features and benefits. Given below are a few ways you can opt to finance your business.
Asset based loan (ABL):
This loan is given against your collateral, i.e. your company assets. This loan is best suited for manufacturers, distributors and service companies whose cash flow is irregular. ABL is often confused with factoring. In factoring, you sell a part of your profit at a discounted price whereas in ABL you borrow money from the lender against your company assets. For example, if you run short of cash and you need an amount of Rs.15 lakh, then you can keep any of your company assets as collateral and borrow the required amount against it.
Business partners or finance business partners work closely with a specific business unit in your setup, with partnership in both operations and management. They help you manage your business effectively and ensure proper cash flow. However, it is necessary to have a written partnership agreement with your business partner which will state solutions in any case of dispute between you and your partner. Before collaborating with your partner, it is essential that you be confident of working and sharing your responsibilities with someone else.
Peer to peer lending (P2P):
This is an online approach of borrowing money to finance your business. Here, an online service will match your profile or needs with a possible lender. You add all the details and strategies about your business and if the lender is impressed with your idea, then they will lend you money. However, P2P lending is an advantage to the lender as the borrower pays the money back through interest which can often exceed the original amount.
Borrow from your family:
If, in your business, you come across a cash flow issue, you can ask your family or your friends to finance your business. This is a good way of raising funds for your business as your investors will not force you to return the money without your business being set up properly.
Said to be the traditional way of business financing, a business loan is one where you pay an EMI based on the interest and principal amount. This loan is known as term loan. However, a few business loans come with the option of Line of Credit (LOC) where you pay an EMI based only on the interest of the money used. For example, if you take a loan of Rs.10 lakh and use only Rs.2 lakh, then you pay an EMI only on the interest of Rs.2 lakh. The remaining Rs.8 lakh can be used whenever you need it. There will be no charge levied on the unused money.
The future of your business depends on its stability and profit. To make sure that your business is stable, you need continuous cash flow. A business loan from Bajaj Finserv is the ideal option as it provides more advantages, like a Line of Credit and online account access. It is also a guaranteed way of financing your business appropriately.