For young entrepreneurs in India, access to cheap and dynamic financing could either make or break their businesses. Traditional lending models are very regimented and do not account for the dynamic nature of business needs. This rigid structure, coupled with moderate to high business loan interest rates, could often result in liquidity crunches for the business and hamper its ability to operate successfully. With equity, ownership must be diluted – a scenario not many business owners will be comfortable with.While business loans present a great funding option for small businesses, their needs can often be unpredictable.
Flexi business loans, on the other hand, address their need for flexibility. Let’s see how.
What is a flexi business loan?
A flexi business loan is a novel solution wherein the borrower is assigned a ‘loan limit’ which they can use as per their requirements. Such a provision could be used to address any business contingency, be it a working capital requirement, business expansion, liquidity crunch, and other such scenarios. These loans are helping many young entrepreneurs in India by extending the following advantages.
Loan Limits
Under this scheme, the entrepreneur is given a loan limit which they are free to use according to the needs of their business. Furthermore, such loans do not have stringent collateral requirements. The only prerequisite is a credit score, and the loan limit will be in direct proportion to the credit score. Thus, the higher the score, the higher the loan limit.
Dynamic withdrawals
The sheer unpredictability of running a business means that funding requirements can be highly volatile. It’s quite likely that your requirements might even change over a day! Flexi loans allow you to withdraw as per your changing requirements. Let’s say, you have a loan limit of Rs.15 Lakhs and you need Rs. 7 Lakhs for marketing. Now, you could withdraw this amount from your limit and have it transferred to your bank account. Later, if you were to discover that the actual expense was only Rs. 3 Lakhs, you could make a partial prepayment of Rs.4 Lakhs and revise your loan limit accordingly.
Reduced EMIs
Term loans come with high EMI requirements which could leave the business with less capital to maneuver. With a flexi loan, you are only required to pay interest on the amount utilized. You also get the option to pay only the interest as the EMI! This could reduce your EMI requirements by as much as 50%.
Quick Approval
Flexi business loans are designed for speedy approvals and disbursements. As a prospective borrower, all you need to do is run your requirements through a business loan calculator before applying for a flexi loan. Your application is likely to be processed within a day.
Conclusion
With the
proliferation of small businesses, there is a pressing need for financing
solutions that cater to the specific needs of such small enterprises. Flexi
loans are an innovative solution to this problem.Already, many young
entrepreneurs in India are benefitting from this flexible financing avenue.