Leverage in business can play an important role in the growth of the organization. Using debt judiciously can enable one’s business to scale up and grow rapidly. Whereas equity funding might be difficult to obtain, it is comparatively convenient to arrange for debt.
A business loan can help a business grow in the following manner:
- Cost of debt is lower than equity:
The cost of obtaining debt is often lower than raising equity as one doesn’t need to dilute one’s holdings. Apart from that interest rate on a business loan is also tax-deductible. This not only provides cheap capital but also assists in a tax deduction.
- Allows the business to upgrade technology:
A business loan in the form of a credit limit or overdraft facility can allow the promoter to pounce on opportunities without any hesitation. Such funds can be used to upgrade technology or buy new machinery.
- Allows the business to keep in with demand through additional inventory:
In a similar manner to the up-gradation of technology, such funds can be used to purchase additional raw material or products in case of trading in times of demand. A business loan can allow the business to take advantage of such a situation.
- Business loans allow for the hiring of additional staff in need:
The availability of funds can allow the business to hire new staff if necessary. Temporary staff can be hired in a peak period without committing to a larger time frame. Often important employees are let go of or not hired due to the fund commitment however availability of funds discounts such problems.
Loans for business are generally required for expansion purposes and once business loan eligibility is verified, the company can use the loan to take the first step in their career of progress.
Additional Read: Planning To Get A Business Loan In Delhi? Know Everything Here!
Finance News 