Starting a new business or building funds for the existing one is not easy, especially in this stagnant economic situation. If the investment is meager, we need to rely on the timely payment from the customers and it may not be always possible. Further, the expenses on the equipment, location, machinery, inventory, communication, travel and a lot more, cannot be met with just the money in hand rather we need additional loans for the smooth money flow.
Business loans are offered to the sole proprietors, partners and for some LLC organisations. Such financial support is offered by many financial organisations including traditional banks, hard money lenders, specialized lenders, private funding instruments and online peer-to-peer lenders.
In general, the business loans may be secure or unsecured. Secured business loans require collateral support like a house or a land or equipment or other assets for the approval. On the other hand, the unsecured loans are offered in accordance with the income profile of the applicant. However, the rate of interest may be higher for the unsecured loans, as the lenders face a greater risk.
Why business loans?
The purposes to raise funds for a business are listed below:
- To increase the working capital
- To manage the money flow when the expected payments do not turn up
- To handle the expenses in the off season
- To purchase office furniture, general goods or inventory for the business
- To invest on machineries or other manufacturing equipment
- To open a new branch
- To improve the marketing strategies for business expansion
- To finance franchise amount
- To renovate the office
- To consolidate the existing debts
The banking institutions offer affordable and reasonable interest rate for the borrowers, who maintain good credit records. Similarly, the business owners who are with poor credit scores may not be able to access money through the banking sector rather they have to search for the alternatives.
Why peer-to-peer loans for business?
- P2P loans are available without any intermediate that the lenders and borrowers meet directly and proceed further.
- Although the rate of interest is higher, the loan applications that were rejected elsewhere have been approved here.
- Business owners have one-to-one communication with the lenders and it avoids the choice of traditional banks or financial institutions.
- The borrowers can decide the lender, through the bidding system.
- P2P lending is comparatively very flexible that the borrowers can decide the repayment schedule and tenure.
- Faster approval time is appreciated, while the traditional financial organisations like credit unions and banks take a few months for approval/rejection of a loan request.
- The businessmen have the option to choose the right lender from the pool of lenders, who have different backgrounds.
- Possibilities to invite lenders with the videos or PPT presentation about the current business operations are available.
Invariable of where they live, today’s businessmen should consider peer-to-peer lending, the unique approach of the financing. This online lending method tries to remove the middlemen and red-tapism in the banking sector.