Micro entrepreneurs and freelancers are common in India today, and the gig economy has also been growing stronger in the country in recent years. Whether you are looking to start your own enterprise or practice or grow your freelance business, you are bound to need working capital. These funds help you to purchase equipment, software or transport and invest in marketing and more.
To do this, you can seek help from different sources, like dipping into your savings, liquidating investments, or asking for help from family, friends or investors. However, these sources either deplete your personal funds or may be complicated to organise. In such cases, a business loan can be an ideal solution.
Read this guide to know the 5 main benefits of business loans for freelancers and self-employed individuals.
1. Does Not Require Collateral Or Dilute Ownership
One of the most significant advantages of going for a business loan is that it doesn’t require you to risk your own assets as security. You can get unsecured business loans from a range of lenders in the financial market today.
Secondly, banks and NBFCs do not demand equity in the company, unlike venture capitalists or investors. So, you can get the funds you need as a freelancer who wants to invest in a bike or car for deliveries or as a CA who wants to buy the right software to increase efficiency without giving away any portion of ownership. This helps you retain control over your business.
2. Gives Easy Access to Capital
You can avail of a business loan of up to 50 Lakhs [EW2] following a hassle-free process online. This makes applying for and getting the funds simple, easy and fast. In order to approve your loan application, lenders generally consider your income, credit score and age.
What’s more, if you are a self-employed chartered accountant or doctor, lenders have business loans tailored to your profession. This makes qualifying for the loan simpler. All you need to do next is ensure you meet the lender’s criteria for minimum business vintage, which means the length of time your business has been in existence.
To prove your eligibility, you will need to submit basic paperwork such as your identity proof, address proof, and income proof. In certain cases, lenders may also ask for an audited Profit/Loss statement related to your business as well as a business licence or registration.
The best part is that you can upload all these documents online and receive approval in a day or less. This allows you to benefit from quick disbursal of the amount so you can finance urgent business needs with ease.
3. Places No Restriction On Usage
With business loans, you can enjoy complete freedom in how you utilize the funds. You can expand your business in a new location or invest in marketing, buy machinery and make the most of the latest technological advancements, or even spend on infrastructure to serve your customers better.
4. Allows for Tax Deductions
You can also get the benefit of tax deductions when you take a business loan. As per the IT Act, 1961, the interest you pay on a business loan every year is eligible for deduction when you file your taxes. This reduces your tax liability and helps you save more. However, remember that you will need to use the loan amount strictly for your business in order to claim this benefit.
5. Offers Ease of Repayment
Business loans provide you with flexible tenures and prepayment options. By choosing the right repayment duration, you can reduce any strain on your finances and repay more comfortably. Usually, lenders offer you up to 72 months to repay these collateral-free loans.
You can use an EMI Calculator online to compute your monthly installments in advance, and plan repayment in minutes. With a stable income and a good credit score, you can get a business loan at a competitive rate of interest. This ensures your EMIs are lower and suit your pocket better.
In addition, when you have surplus capital, you can prepay your loan in part or in full to relieve your debt sooner than planned. This allows you to save on interest too. Check the part-prepayment and foreclosure charges of lenders and choose a lender with minimal fees to be able to do this when you can.
Lastly, you can get a line of credit or Flexi Business Loans instead of term loans from certain lenders to address business expenses when they occur and save on interest. These loans give you more flexibility and can help you bring down your EMIs in the early part of your tenure.
The reasons listed above clearly outline why you should consider a business loan as a freelancer or a self-employed individual. To check your eligibility and compare various business loans offered by top banks and NBFCs, visit the Bajaj Markets App. Download it on Google Play or the App Store and boost your business today!
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