Keywords: business loan apply, business loan online, business loan
Managing cash flow can sometimes become challenging, especially for Small and Medium Enterprises (SMEs). Delayed payments from clients can severely impact the operations, growth, and expansion of these businesses. In these situations, firms consider either invoice discounting or business loans. Both options have advantages, but which one is better suited for your SME?
Here’s an article that explores the differences between the both and helps you make the right choice.
Understanding the Invoice Discounting
Invoice discounting is a short-term financing option where businesses get access to funds in place of their unpaid invoices. Instead of waiting for customers or clients to pay, you can get quick funds and start business operations.
This process works when an SME submits their invoices to the lender, who checks the borrower’s creditworthiness. The lender then provides a percentage of the invoices. Once the customer pays the full amount, the lender deducts the amount borrowed and the extra charges and transfers the balance to the user’s account.
Benefits of invoice discounting:
- Borrowers get quick access to funds to cover their expenses.
- Invoices are considered the collateral.
- The loan can be repaid once the customers settle the invoices.
Understanding the Business Loans
A business loan is a financing option specifically designed to allow users to borrow funds for the growth and expansion of their businesses. Under this option, businesses borrow a fixed amount from the lender at a specific rate of interest and repay it over a decided period of time.
The process works when an SME applies for a business loan online, fills out the application form, uploads documents, and completes the necessary verification. Once everything is done, the funds are disbursed to their bank accounts.
Benefits of taking loans for businesses:
- It allows users to borrow an enormous amount of money without any collateral.
- Borrowers can use the funds for their business needs without restrictions.
- The repayment terms are decided by users and lenders on a prior basis, allowing borrowers to manage finances accordingly.
Which is Better for Your SME?
The choice between invoice discounting and business loans depends on an organisation’s financial needs and preferences. Let’s understand which one is better for your business and help you make an informed decision:
Choose an invoice discounting if:
- You need a small amount of funds to carry out daily operations and manage cash flow.
- You need funds on an urgent basis.
- Your SME has a number of unpaid invoices.
- You are looking for a short-term financing option.
Choose to apply for a loan for your business if:
- You are looking for a larger sum to expand your business or need machinery.
- You prefer to pay a fixed monthly amount to repay the loan.
- You don’t want to pledge your assets as collateral.
- You need funds beyond your invoices.
Steps to Apply for a Business Loan
Follow the below steps to process the business loan apply process:
- Do your research, compare your options, and choose the right platform, such as Bajaj Finserv, to make a successful loan application.
- Check eligibility and make sure you qualify for the same.
- Be ready with the necessary documents and ensure a good CIBIL score (more than 750) to get quick loan approval at lower interest rates.
- Fill out the application form, provide the updated information and upload the necessary documents. Wait for your application to get verified.
- Once your application is approved, funds will be disbursed to your bank account.
Conclusion
It is concluded that both invoice discounting and business loans are great financing options. Assess your business requirements and choose invoice discounting if you have too many invoices and need quick, short-term funds. On the other hand, apply for a loan if you want a larger sum and want to repay it in a fixed monthly amount.
So, make the right choice for your business, secure your SME needs and turn your business dreams into reality.
