Both small and large businesses frequently need additional funding to cover ongoing costs. The amount of funding required depends on the type of business, the capital intensity, and the stage of development—from start-up to growth to maturity.
Typically, a company’s initial stages and future growth require the most funding. We will cover the types of business loan in Mumbai that Indian financial institutions will approve in this article.
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Working Capital
Individuals, business owners, startups, and MSMEs use working capital loans to cover their daily expenses as well as for various business expansion services, improving business cash flow, buying raw materials, etc. Working capital loans are typically short-term, up to Rs. 40 lakh loans with 12-month payback terms or longer depending on the needs of the firm. In this type of loan, the lender sets a maximum loan amount that the business may obtain and that may only be used for particular business needs.
Term Loan
A loan with a defined payback schedule is referred to as a term loan. Term loans come in three different lengths: brief, medium, and lengthy. Repayment lengths for these two types range from 12 months to 5 years. Short-term loans are those with a tenure of less than one year, and long-term loans are those with a tenure of five years or more.
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Payroll Financing
Payroll funding, which is another name for payroll financing, is a type of finance that enables businesses to obtain capital for the processing of their payrolls. Businesses can run into issues with controlling their cash flow and completing payroll on time.
In these unprecedented times, small- to medium-sized businesses occasionally find themselves in a funding bind. For businesses, it is more challenging than ever to stay afloat. Due to a lack of cash, many companies had to shut down, and the majority had to lay off employees. Businesses that want to retain their workforce and avoid having to let them go increasingly need payroll financing.
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Letter of Credit
Businesses that conduct international business can get a funding guarantee from a bank or other lender through a letter of credit. The trading industry is where you’ll typically see this kind of credit limit. Letters of credit are a tool that business owners can utilize for both import and export transactions. Foreign-based companies need payment assurance before making any purchases because they frequently work with unidentified suppliers. Therefore, a letter of credit is necessary to guarantee suppliers’ payments.
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Bill discounting
Discounting of bills or invoices is a financing choice in which the lender provides the seller with cash up front at a lower rate. To increase the revenue of the financial institutions, this necessitates customer contribution in the form of interest rate, interest paid, and from the monthly fee.