A business enterprise is an entity that primarily looks to book profits for the stakeholders. The business can be owned by a single individual (Proprietorship), a group of people running the enterprise (Partnership), Hindu Undivided Family (HUF) and a Body Corporate or Company. While all others which a company is not personally liable for the business affairs, the company, on the other hand, is an independent entity governed by corporate laws of the country.
The enterprises indulge in the manufacture, services, marketing or sales, primarily to generate revenues. All efforts boil down to the fact that the enterprises aim to earn profits not only to sustain the stakeholders but also open other options that impact the society at large. Expansion and growth of the business are intrinsic to the character of the enterprise to maximize profit.
Ways to Finance Your Business
Any business enterprise needs fund to establish, run and expand. The sources for the funds in this endeavor can be personal or through lenders. Most people have to fall back on business loans to start or expand a business. In the Indian scenario, there are a host of lenders like banks and NBFC who extend business loans.
Government of India Initiatives
Flagship programs like Stand-Up India, Start-Up India, Mudra Loan, PMEGP, etc. have been specifically launched to encourage the youth of this country to indulge in entrepreneurship in SME and MSMEs to provide gainful employment opportunities. The target audience comprises:
- SC, ST, OBC members
- North East Region; and
- Border areas
Features of Business Loan
It is beyond question by now that the business loan aims to fulfill the financial needs of an enterprise to establish, run and expand and grow in future. In India, the SME and MSMEs form the bulwark of economy sharing 45% of the GDP and providing gainful means of livelihood to over 7 crore people. The Government initiatives like Stand-up India and Start-up India envisage provision of loans as under:
- Loans from Rs. 10 lakhs up to Rs. 1 crore.
- Mudra Loan up to Rs.10 lakhs.
- Affordable Large Capital.
- Ensure Cash Flow.
- Minimal or no Security.
- Hassle-Free Online Application.
- Quick Approval
Eligibility Criteria for Business Loan
The criteria defined here are typical and can vary from lender to lender. It is prudent to check with the lender for a specific requirement.
- Age between 21 and 55 years.
- For Government Schemes, the venture may be new. For existing ventures, it must be 3 years old.
- The customer profile considered for a business loan:
- Self Employed Individuals:
- Retailers; and
- Service providers.
- Self Employed Professionals:
- Limited Liability Partnership (LLP)
- Limited Liability Company (LLC)
- Private Limited
- Self Employed Individuals:
Rate of Interest, Fees and Other Parameters
This is a vital component of any business loan which impacts the cost of capital. It is prudent to check for the rates and fees before venturing into a loan.
The main characteristics of a business loan that distinguishes it from other loans are tabulated below:
|Rate of Interest||15% to 27%|
|Processing Fees||1% to 2% of the Loan|
|Quantum of Loan||Up to Rs. 2 Crores|
|Repayment Tenure||Up to 2 Years|
|Repayment Mode||EMI or Flexible|
Ways to Expand Business
Once the business enterprise is established and running, there comes a time when the issue of expansion crops up. It is not only, meant to augment the revenues but also to see that the enterprise grows. The approach is basically three-pronged as below:
Open New Locations: Locating a branch in a new area allows increasing your client base and access to new opportunities. The key factors you must consider before opening a branch are:
- Assess whether your business can sustain another location.
- Conduct thorough market research, plan and budget before physical expansion.
- Choose your location wisely so that you can foster your business in the new location.
- For the success of any such venture, the constitution of a dedicated team to monitor the new location is imperative. The team would be responsible to see the business going.
Open a Franchise: When your business is also an opportunity for investment, there are likely to be many takers. Through this mode, you can open multiple franchisee locations with the help of the investors.
Merge with Existing Business: By this way, you can take up the location of another business and their operational site. The key factors to consider are:
- The business activity must be similar or complementary.
- It is prudent to retain the staff to ensure business continuity in retaining the existing client base.
Increase Staff Strength: When your business grows, it is the staff who are stretched at the seams impacting customer service adversely. It best to hire new staff, assure career progression and provide incentives to keep them happy. After all, a happy workforce helps your business grow.
Business Diversification: When the market for your product or service has a good client base, you may consider adding complementary or service to the same client base and the new ones as a one-stop-shop. Even additional services may be considered.
The Incentive to Loyal Customers: It is a sure way not only to retain existing customers but a sure way to woo new customers.
Use Innovative Ideas: The world of the business environment has transformed beyond recognition in the recent past. It has mainly been driven by the digital environment. Some of the modes to use profitably could be:
- Allow the sale of your product online.
- For services, create an appropriate portal interacting with your customers.
- Align with well-known E-commerce sites to access the large cross-section of “Netizens”. It allows you to tap a very large market without much hassle.
- The social media has of late become an important tool to reach a wide cross-section of people, which can be transformed into a potential customer base if handled sensibly. Make your presence felt in the social media with the page of your own and promote them frequently.
The focus in this method is enunciated in the following for consideration of the expansion of the business.
Alliance with Other Business: The possible alliances can be many, all with the aim of business expansion
- Service Solution
- Joint Venture
Licensing Product: It augers well if the products are licensed and can woo customers.
Expansion of any business is the corollary to a healthy enterprise. While there are commercial implications attached to the process of business expansion, understanding the customer need is vitally important. With a rational pricing strategy, quality maintenance and prudent marketing approach, a business entity can not only sustain its activity but will need to expand.