Term Loan Term loan is offered under various types, such as short-term loan, long-term loan and other small business loans. The loan amount offered under term loan depends on the applicant’s profile and business requirements that can be repaid in 12 months to 5 years, in the form of EMIs. Term loans are divided into two parts, unsecured business loans, and secured business loans. Secured loans require collateral to be submitted with the lender, which is not the case with unsecured business loans.
Working Capital Loan Working capital loans are availed to meet the day-to-day business requirements or to manage business cash flow. The working capital loan can be availed for various other purposes, such as business expansion, buying equipment or machinery, purchasing raw material or goods, paying off salaries or rent, enhancing inventory, and much more.
Bill (Invoice) Discounting Invoice discounting is a financial instrument offered by banks and NBFCs. Bill discounting is a source of working capital finance for the seller of goods on credit. It is a discount which a financial institution takes from a seller’s customer. Through the payment being made by letter of credit, the buyer has the option of buying goods from the seller. Bills that come under bill discounting are termed as ‘bills of exchange’.
Letter of Credit Letter of credit is a payment instrument used mainly in international trade in which the bank provides a monetary guarantee to enterprises that deal in the import and export of goods. Enterprises doing businesses overseas have to deal with unknown suppliers and they require assurance of payment before performing any transaction. Therefore, a letter of credit is important to provide payment assurance to the suppliers or exporters.
Point of Sale (POS) Loan Point of Sale Loan is a type of funding wherein merchants offer their customers some financial assistance at the point of their purchase. Business owners, enterprises, MSMEs, entrepreneurs, and retailers can avail Loans against POS machines to start a new business or to manage their existing businesses. POS Loan is also termed as Merchant Cash Advance in which the loan amount depends on the business volume generated via POS terminals.6. Overdraft Loan An overdraft means overdrawing money from ones’ current/savings account even if the account balance is zero. An agreed rate of interest will be charged if the overdrawn amount is within the limits of a preceding agreement. The interest rate is charged only on the utilized amount of the total withdrawal limit.
Shanvi Micro Federation
