A loan is generally taken for the purpose of procuring something for which an individual does not have the requisite funds. A loan is monetary support from a Bank or Non-Banking Financial Company to complete the purchase process in order to satisfy the urge to have something. There are different types of loans available with a Bank. The following are different types:
- Personal Loan- This is a loan taken by an individual to satisfy needs that can not be satisfied with the person’s income but are essential for the individual.
- Car Loan- This is a loan taken to buy a new or used car by an individual.
- Home Loan- This is a loan taken by an individual or group to buy a house or commercial property.
- Education Loan- This loan is generally taken by a student to pursue higher education.
- Consumer Durable Loan- This loan is taken by an individual to purchase a Consumer durable at home or office.
- Business Loan- This loan is taken by a business entity in order to be used for expanding business, to be used for working capital needs etc. Now we will understand various aspects of this loan.
A Business entity is generally a place for generating profits from servicing people at large with Products or Services. In a life span of a business entity, there are times when it needs extra funds for Working Capital, Expansion, Acquisition or entering other territories within the country or overseas. For any of the above-mentioned activities, the extra funds are generated by taking Business Loan. Depending on the type of funding party (Bank or NBFC) the interest rates differ, and the loan is generally taken for a long term because the business plan can not be executed in a shorter time but it’s a long-term strategy of the organization to go for any of the above-mentioned activities.
Depending on the size of the organization and the plan layout, the business loan is taken by the organization and for the tenure as decided by the management. The funds thus are mobilized in order to achieve the desired outcome.
Recently in the past 7-8 years, the central Govt has come up with various initiatives for Women entrepreneurs and for MSMEs. A Mudra loan is one such loan that is available for Women entrepreneurs, which starts from as small as Rs. 50000/- and goes up to Rs. 10 Lacs. Depending on the kind of business, the loan has very attractive interest rates, which does not cause a burden to the person availing the loan.
When the business organization takes a loan of high value, taken in lieu of some assets, it is available at a low-interest rate and easy tenure. If the organization is unable to pay up the loan EMI on time, the bank is authorized to take custody of assets which are mortgages for taking loans.
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