Managing funds properly is one of the most important aspects of running a business successfully and efficiently. In most cases, the small business owner completely exhausts all his savings in starting his business venture. Having your own business is certainly a good feeling but it put some responsibilities on the business owner’s shoulder.
He is required to multi-task, work for long hours, and handle all various tasks single-handedly. These tasks also include managing funds efficiently. Well, with the financial resource constraint that the businessman works, it is imperative for him to plan the finances in the long run. Otherwise, he might end up in a cash crisis or debt trap.
And when we talk about managing finances, it does not only involve cutting down on expenses and quick realization of payments. But it also involves taking the right decisions regarding finances at the right time. And this financial decision also involves deciding when to avail funds from an external source, such as a business loan.
If all the savings have dried up and the businessman is facing problems regarding finances, then the best way to supplement finances it to avail a short-term business loan. There are various lenders in India who offer business loans with or without security through online and offline channels. The same can be availed to meet financial needs.
What is Short-term Business Loan?
A short-term business loan is a loan availed for a short-term, usually ranging from 6 months to 24 months. A short-term business loan can be secured or unsecured. You will have to provide an asset to avail a secured loan. And there is no need to hypothecate an asset to get a business loan without security – unsecured business loans.
Business loans without collateral are specially designed for small businessmen who cannot offer asset. They are meant to meet the needs of small business owners in the best way. The small businessmen can take care of their urgent expenses without affecting their working capital or cash flow.
The collateral-free loans are offered by many loan lenders in India. Since there is no need to hypothecate an asset, the lender checks the creditworthiness of the borrower. This is the only condition on which the loan is approved. Also, the loan amount approved depends on the credibility of the borrower.
To avail a short-term business loan without security, the businessman can apply through the online channels offered by the online lenders for the convenience of the borrower. After applying for a loan, the business owner can submit the soft copies of the documents. The lender will use the documents to assess the credibility of the borrower.
One perk of applying for a loan is that the loan application is approved faster and the loan amount is disbursed within a few working days. Also, online channels help in comparing loans on the basis of various critical factors. It helps in taking a sound and informed decision.
How to plan Finances in the Long Run?
Planning the finances, in the long run, is important for a small business owner as it helps in ensuring the success and longevity of the business. In addition, it also helps in reducing the reliance of the business on borrowed funds. For this, the business owner will have to analyze various internal and external funds available to make sure that the business is on the path to success.
Let’s take a look at the factors that are crucial for the business owner to keep in mind while planning the finances for the long run:
- Unnecessary Expenses: Cutting on unnecessary expenses is on the number one priority. This firstly involves identifying wasteful expenses and auditing other various operations. Secondly, the business owner must also work towards having a lean organization structure.
- Emergency Fund: Having an emergency fund is essential as it helps in taking caring of funds during emergency situations. The amount of money the businessman must allocate in the emergency funds differ from one business to another. However, the rule of thumb says to allocate at least 5% of the monthly revenue in the emergency fund. Having emergency funds will help in situations of financial urgencies. It will also help in never letting the situation go out of hands.
- Debt-Equity Ratio: Maintaining a good debt-equity ratio is very important. The over-dependence of the business owner on the external sources of finances is not a desirable situation for any business. The businessman must strike a balance between the capital and borrowed funds. Borrowed funds will only put an unwanted and unnecessary burden on the financials in terms of EMI payments and the interest cost.
- Debt Consolidation Loan: If the businessman is running on various loans on high-interest rate, he can switch to the debt consolidation loan. This will turn all different loans into one and also cut down on interest expense. The number of EMIs would also eventually decrease to a single in a month and the businessman will be able to manage them more efficiently.
- Avail Business Loan: To incur expenses like the purchase of machinery without affecting the cash flow, a business loan can be availed. By buying machinery with the help of a loan for business, the businessman will not have to take a huge chunk of funds from his working capital. Also, he can easily repay the machinery loan availed in easy monthly EMIs.
FAILING TO PLAN IS PLANNING TO FAIL!
This famous saying fits true in this situation. The business owner must pay attention to financial planning in order to run his business in the right direction. Otherwise, things may go out of his hands quicker than he anticipates.
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