Pros and Cons Of Business Loans

by Sheena Sharma Financial Advisor to help you find the best soluti

Business loans are credit facility extended by the financial companies to the businesses in need of funds. The finances availed can be used to scale up the business, buy inventory, machinery or equipment, and pay wages or marketing costs.

It is not always possible for a business owner to have enough funds to run his business. Thus, he looks forward to availing a business loan. It can undoubtedly be of great help. But small business owners are generally denied bank loans.

In that case, a business owner can avail a business loan from other financial companies in India, such as NBFCs. Small business owners can avail MUDRA loan as well; it is a government scheme for SMEs in India.

Now, let us discuss the pros and cons of availing a business loan.


  • Pre-decided EMI Amount: one benefit of availing a loan for business is that you know in advance the amount you will have to pay every month towards the repayment. Loan lenders offer EMI calculators that can help you calculate the EMI and finalise according to your budget.

  • Help Building Business Credit: by availing a business loan, you can build your business credit as well. This means that you can avail a small business loan, pay all the EMIs on time, and build a good credit score.

  • Available for Many Business Uses: the loan funds availed under business loan can be used for different business requirements, be it to pay wages, marketing expenses, buy machinery, or to expand the business.


  • Longer Wait Time: it generally takes 1-2 month to get the bank loan application approved and the amount disbursed. However, if you avail a loan from an NBFC, the application is approved, and the amount is disbursed within a few working days.

  • Requires Strong Credit: most lenders require a strong credit score to approve a business loan application. NBFC business loans are offered at a credit score of even 700.

  • Usually Requires Collateral: banks offer collateral business loans. A small business owner is required to pledge security against the loan amount. But NBFCs offer unsecured business loan, i.e. loan for business without security.

Everything has pros and cons, and so does the business loan. However, pros overweigh the cons, and if you avail a business loan from an NBFC then the cons also turn into advantages. So, one can conclude that availing a loan for business can be very advantageous for small businesses in their growth.

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About Sheena Sharma Advanced   Financial Advisor to help you find the best soluti

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Joined APSense since, October 16th, 2019, From New Delhi, India.

Created on Oct 22nd 2019 07:02. Viewed 730 times.


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