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Each entrepreneur needs to maintain positive working capital to fund day-to-day operations efficiently. The positive working capital further helps the business to meet short-term financial obligations on time and avoid negative cash flow situations. The entrepreneurs can meet working capital needs by accessing credit through a number of options. Business loans are one of the most preferred options to access short term finance. The unsecured business loan products enable entrepreneurs to avail lump sum credit to meet varied financial needs.
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Each entrepreneur needs to maintain positive working capital to fund day-to-day operations efficiently. The positive working capital further helps the business to meet short-term financial obligations on time and avoid negative cash flow situations. The entrepreneurs can meet working capital needs by accessing credit through a number of options. Business loans are one of the most preferred options to access short term finance. The unsecured business loan products enable entrepreneurs to avail lump sum credit to meet varied financial needs. The entrepreneurs still have option to choose from a variety of business loan products. The repayment period and interest rate vary from one type of business loan to another. Also, the eligibility criteria for same type of business loans may also differ from one lending institution to another. But a large percentage of business owners prefer business loans to other forms of credit because of the advantages of a business loan as compared to other options. There are also a number of reasons why business loans are one of the most preferred financing options for small businesses and startups.
Advantages of a Business Loan: 3 Reasons Why Entrepreneurs Prefer Business Loans to Other Financing Options A Wide Range of Business Loan Products An entrepreneur has option to choose from different types of business loans. Some of these business loan products are secured, whereas others are unsecured. Some business loan products like term loans allow borrowers to avail credit at fixed interest rate and repayment schedule. At the same time, technology-driven business loan products like POS-based loans enable entrepreneurs to repay the loan through multiple options – daily percentage instalment or daily fixed installment.
Differential Repayment Options The term loans require borrowers to repay the debt based on a predetermined repayment schedule. Hence, it becomes easier for the entrepreneurs to avoid negative cash flow position by forecasting interest and EMI payments precisely. At the same time, the technology-driven loans provided by certain non-banking financial companies enable borrowers to choose from multiple payment options according to the liquidity and cash flow position of their businesses. Hence, it becomes easier for entrepreneurs to repay the debt in a flexible way by choosing the right business loan product.
Option to Negotiate for Favourable Lending Terms Normally, the eligibility criteria for business loans differ from one lender to another. But most lending institutions determine interest rate based on credit risk associated with the business loan. Hence, an entrepreneur can easily negotiate for lower interest rates and extended repayment period if he meets the eligibility criteria set by lenders. They can even negotiate with favourable terms of lending by maintaining a positive cash flow position and excellent personal credit score.
