Commercial Loans For Small Business

What is a commercial loan?

In its early stages, an organisation will come across several business opportunities that present genuine chances for inorganic growth. However, pursuing them would require an infusion of significant capital to yield substantial returns in the long run.

The requirements of a growing business take many formspurchase of manufacturing equipment, procurement of raw materials, technology upgrades, setting up new processes, platforms, R&D effort, supply chain management, balancing of cash-flow over long cycles of payment, etc. In all these situations, a commercial loan can be a lifesaver. Commercial loans are typically debt-based, short-term finance that companies explore to fund their capital expenditure and unforeseen operational costs.

How to use commercial loans for business

Earlier, commercial loans only catered to short-term funding, but over the years lenders started extending it to managing payroll and/or purchase of smaller supplies as well.

Businesses do not have the same amount of sales all year round. The festivities, weather or even simple factors such as school holidays determine the purchasing patterns of consumers. For example, air conditioners and refrigerators are in demand during the summer and the garments industry receives huge orders during the festival seasons.

SMEs often use commercial loans to meet seasonal fluctuations in the demand-supply equation. The instrument that financial institutions offer to tackle such fluctuations is known as a renewable loan. When the borrower repays the sum along with the accrued interest within the prescribed time period, the lender may extend the amount again for a renewed period. Commercial loans in India help SMEs take up new projects and reach out to a different segment of the market while serving their existing set of customers.

Benefits of taking commercial loans

The reasons for seeking a commercial loan are unique to each borrower. However, here are some of the common ways SMEs benefit from a commercial loan:

  • Expansion: SMEs with an established business model and a modest transactional history can use commercial finance to fuel their next stage of expansion. SMEs can also look at replicating their success across geographical locations or target a new audience.
  • Equipment and tools: Newer technologies and tools can greatly enhance the quality, productivity and the overall output of a business. SMEs can leverage commercial finance options to invest in technology that directly translates to competitive advantage.
  • Inventory management: In many cases, being prepared to take up a big order means having the required raw materials in a ready-to-use state. Commercial loans can be used to buy critical inventory ahead of time.
  • Increase working capital: A healthy working capital is critical to the survival of any organisation. Commercial loans help balance adverse financial implications of payment delays by customers.

Capital Float offers flexible, short-term commercial loans in India that can be used to purchase inventory, service new orders or optimise cash cycles. The commercial loan tenure ranges from 6 months to 3 years with interest rates varying between 16% and 24%. Borrowers can apply online in minutes, select desired repayment terms and receive funds, hassle-free, in their bank accounts within 3 days.