Summary – Want to discover the basic differences and other aspects between a business loan and a line of credit? Read on to know more!
When it comes to any business in India or beyond, you need to know that maintaining it needs a consistent flow of money.
In other words, money or the business capital is the lifeblood of any firm or business.
Being a business owner, if you can manage to pump it at the right time to your business, it will help it functioning without issues.
Thus, when you have a business, you should be aware of various types of business loan available in today’s time if you need fun to run the show successfully.
However, if you think you need some funds to manage running the business without issues, you should have an in-depth knowledge of multiple business loan types.
If you don’t do the planning beforehand and avail any fund, it can lead to more fund needs and repaying unwanted debts.
Talking about various types of business loans in India, an online business loan and the line of credit are two reliable and popular financing modes available in the market.
If you are confused between the selection of the business loan and the line of credit, then this post will help you know some vital insights. Have a look:
Business loan vs. line of credit – A quick comparison
The usage of the two financial facilities
Talking about the usage of these finances, a business can avail the business loan only once while the line of credit could be used for multiple times as per their needs.
A line of credit or the (now known as the flexi loan facility) is a unique facility offered by leading online lending companies. It lets the business owners enjoy the freedom and flexibility to use the money as and when needed.
The flexibility of withdrawing funds as per the business needs is its biggest benefit. In return, it keeps off owners from the idling of funds.
Leading online names in the business of finance can let you avail a line of credit or flexi loan facility along with the business loan up to Rs.30 lakh.
The purpose of the two finance options
There are so many advantages of business loan. The basic purpose of the business loan is to offer you a source of finance which you can use for a specialized purpose, for example, maintaining the business cash flow. On the other hand, the purpose of a line of credit facility is to offer you funds when as and when you need them.
Nowadays, a large number of businesses use the line of credit facility as the source of continuous finance for different business purposes and at different times. As a result, business owners are free to use the facility to upgrade to a new technology, hire new staffs, purchase or lease new equipment and beyond.
How do you repay these finance options?
When it comes to the repayment of the business loan, it follows a periodic cycle. However, the line of credit payments depends on the limit of the funds utilized. As a result, you can just pay the interest as the EMI on the amount used and not on the principal component. Like this, you end up saving up to 43% on the EMI payment. It also helps business owners to save big amount on the repayment and hence, it helps them build on the current business capital.
The line of credit facility offered in today’s lenders’ business loan facility helps business owners to repay the remaining amount (principal) at the culmination of the loan tenor. Hence, it aids them as a form of amazing savings in the form of the cash flow.
The Bottom Line
Now that you are aware of both facilities, you can make your mind which one to opt for if you wanted some finance to expand or grow your business. Once you have decided, you can apply for it online and save your time and efforts.
Bajaj Finserv offers some pre-approved offers on many financial products such as personal loans, home loans, business loans and more. You can check your pre-approved business loan offer by sharing some of your details right away.