A manufacturing company can maximise revenues by increasing production with the help of a business loan. However, business loan applications and their approval process might seem time-consuming for many, especially for small manufacturing businesses. As per a study, only 42% of small businesses get their financial needs met, highlighting the importance of choosing the right loan for your business.
How to Select the Best Financing Option?
As per a report, 8 out of 10 small businesses tend to grow their company after receiving a business loan. However, selecting the best lender for you is the first step that you should focus on.
Your needs should determine the lender appropriate for you and your business. For example, banks would be your best bet if you needed a secured business loan. Additionally, NBFCs are the main providers of unsecured business loans if that’s what you’re searching for.
Some parameters that you should compare different lenders on are as follows:
- Loan amount offered and the repayment tenure
- Loan eligibility criteria, including credit score, income, etc.
- Interest rate of the loan and other associated charges (processing fee, prepayment charges, etc.)
How Manufacturers Can Apply for Easy Business Financing?
You will need to submit an application for the loan after deciding on the best manufacturing business loan source. You might be able to apply online or offline for a business loan based on the loan provider.
In case you wish to apply online, you must follow the below-mentioned steps:
- Visit the official website of your preferred lender.
- Navigate to the loan section and apply for a business loan.
- You have to fill out the application correctly.
- Upload all the necessary soft copies of the documents required.
After submitting the application, the lender will assess your eligibility for the loan before offering you a business loan.
If you are applying offline, you need to visit the lender’s office in person. Submit the filled-in application form along with copies of the required documents. The representative may choose to ask some questions before offering you a loan.
Additional Requirements to get Business Loan Approval
It is essential that you meet all of the lender’s requirements for business loan eligibility. A good credit score is crucial for guaranteed eligibility; usually, lenders require a credit score of at least 750 for approval. Additionally, a high credit score can considerably lower a business loan’s interest rate.
How to Use a Business Loan?
The following are some ways you can expand your firm by using a business loan:
- Increase in production
You must increase production to meet rising demand. New gear and raw materials are expensive, especially for startups and small firms. With a small business loan, you can buy machinery and raw materials without reducing profits. Instead, new equipment will optimise output, save costs, and increase profits.
- Inventory source
As a wholesaler or retailer, having a large inventory to match consumer demand is key to repeat business. You can use a business loan as working capital to buy products in bulk if you predict significant demand during a season or festival.
- Launch New Product
Make use of your customers’ faith in your current products to launch a new range. Your brand can attract new customers with a new product. Short-term financing lets you fund product design and development and launch your new product quickly.
- Enter new markets
Entering a new market can boost profitability and expand your business’ reach. However, opening a new store needs land, construction, recruiting new staff, and creating a new supply chain, which is expensive. Luckily, a company loan can cover all these costs and provide you an edge over your competitors.
- Pay Unpaid Bills
Too many unpaid debts undermine your business’s creditworthiness and revenues. A business loan might help you pay off inventory and electricity expenses and enhance company finances. If you diluted equity to raise investor financing, an unsecured business loan could help you recover. Regain full control of your business and decision-making with a business loan.
- Market and advertise
If word-of-mouth and referrals are your only marketing methods, you may be missing a large portion of your target market. Run email marketing, social media posts, and paid online ads campaigns with a business loan. Active marketing brings new clients to your brand. It helps you connect with existing clients and gain their loyalty.
- Debt Consolidation
If you have many loans and are struggling to pay separate EMIs, a business loan can help you to refinance them. You can consolidate all your loans and pay one monthly EMI. Thus, debt management is easier, and you can focus on business growth.
Small company loans are the ideal source of capital for entrepreneurs looking to expand their enterprises. While the exact steps involved in loan disbursement vary depending on the lender, they usually include contract signing, loan tenure, and EMI calculation. Before signing, you must carefully read over all of the terms and conditions. To sum up, small business loans give entrepreneurs a useful way to obtain capital and ensure the expansion of their companies.