A growing business means growing needs! As your business prospers, you will eventually need additional cash to keep it thriving. Maybe you will need funds to purchase inventory, hire more staff, or buy equipment that will make your business operations smoother. In such situations that demand immediate funds, debt financing can come in handy.
Debt financing means that you borrow money from an outside source, with the promise to return it at a fixed rate of interest. The most common example of debt financing is a loan for business. But, there are other types of debtfinancing you can look into, like small business credit cards, microloans, and government incentives.
Here are five benefits of debt financing for your business.
#1 Maintain ownership of your business
While angel investors and venture capitalists can help your business financially, they may interfere in your business operations. But, if you opt for debt financing for your business, you get the funds and the freedom to make your own business decisions.
Your lender will charge you interest on what you borrow, but you can rest assured they will not get involved in how you run your company.
Additional Read: 10 Benefits of Taking a Business Loan
#2 Enjoy tax deductions
Both the business loan interest rate and principal payments on your loan come under business expenses. Therefore, you can deduct them from your business income when you file your taxes.
These tax deductions can even lower your total interest payable. Calculate the difference between your interest payments and tax savings in a year. You will realise that your burden of repayment is reduced.
#3 Easier financial planning
To plan your repayment, you can use a business loan EMI calculator. Input your loan amount and tenure. The tool will calculate your EMI amount and the total amount payable (principal and interest).
When you know in advance exactly how much you need to shell out each month, it makes financial planning easier.
#4 Helps build a business credit score
When you pay off your debt timely and responsibly, it reflects in your business credit report and improves your business credit score. With a good credit score, you will find it easier to get loans and other lines of credit approved in the future.
#5 Accessible to businesses of all sizes
Venture capitalists and angel investors are very specific regarding the size of the business they want to invest in. But, debt financing makes working capital accessible to businesses of all sizes. So, no matter what stage your business is at, debt financing can help.
Additional Read: 5 Ways to Quickly Pay off Business Debt
With debt financing, you can enjoy the freedom of making your business decisions, avail of tax deductions, plan your finances, and build a high credit score.
If you want to arrange funds for your business with a business loan, Tata Capital is here to help you. We offer unsecured loans so that you do not have to risk your business assets. What’s more, we offer you competitive interest rates and flexible repayment options.
To learn more and apply online, visit our website today.