Managing the cash flow in business is the essential requirement for every business to function, expand and grow in the market. While having a constant flow of funds is necessary for the business, what is equally important is identifying the right source of money. There are various sources like getting funds from banks, non-banking institutions and various government schemes from which you can fulfil the need of cash in a business. A business loan is the most preferred source of getting funds as the process of getting a loan is easy and can be availed with no paperwork. You can also get microloans for your enterprise if the requirement of funds is less.
What is a business loan:
A business loan is secured and unsecured loan intended for any activity of a business. Various banks and non-banking institutions provide business loans at attractive rates. Presently, a business loan can be availed for a tenure of 12 to 60 months. The lowest business loan interest rate starts at 13.50% and is provided by the Corporation Bank.
What are microloans:
Microloans are small or short term loans, usually for self-employed businesses who want to start their business. These funds can be used for setting up the business and often provided by individuals rather than the big banks.
Difference between a regular Business Loan and Micro Loans:
Here are some of the key differences between these loans which can help you to make a correct decision.
- Loan amount: The significant difference between a business loan and a microloan is the amount of loan amount. As the name suggests, a microloan is a small business financing option available for loans of smaller amounts. A microloan is available for up to Rs. 1 Lakhs. A business loan, on the other hand, can be availed for small as well as massive amounts. You can get a loan amount up to Rs 50 Crores as a business loan.
- Loan tenure: A microloan is provided by a non-profit organisation and is available for shorter tenures. However, you can avail a business loan for more concise as well as longer tenures. The maximum tenure of a business loan can be 60 months.
- Interest rates: The rate of interest of a business loan is much lower than a microloan. Business loan interest starts at 13.50%. On the other hand, a microloan is financed by non- profit organisations, so the rate of interest is fixed and usually higher.
- Benefits: A microloan can be utilised for specific purposes only. However, the end-use of business loans is not fixed and can be used for any purpose. Other benefits for business loans is that you can get attractive Flexi loan benefits like getting a loan for a certain amount and time period. You don’t require any collateral to get such loans. Also, the flexible repayment modes are available for a Flexi business loan.
Thus, a microloan can only fulfil your micro requirements for a business, and if you need funds for expansion and growth of the business, a business loan is the most popular source of getting funds. other resources : Bridging finance London