Loans and How to Use them
Emergency loans are saviors when it comes to business owners. When you are starting or running a business, there are unexpected costs and expenses that come your way and they may leave you wondering about finances and how to arrange for them. This is a stage where emergency loans or instant loans can be of great help to entrepreneurs. These loans may be specifically beneficial to small and medium-sized businesses. Small and medium-sized businesses form a major part of the economy.
Let us understand better what emergency loans mean and how they are helping businesses in the economy
What are Emergency Loans?
Emergency loans for business owners or entrepreneurs are short-term loans. These loans availed by the businesses are generally unsecured. The end use of the loan is not defined and the business owners can use them for various purposes. These loans are availed when there is a sudden change in the business environment or a natural calamity etc. One of the greatest benefits of emergency loans is that they get approved very quickly and the disbursement process is also very fast. This helps the business owners to make use of the funds as desired.
Benefits of Emergency Loans
- Safeguards in case of losses
In case of any sudden losses or in case of any losses in the business when the business cannot sustain the loss, in these cases, emergency loans can really help the business to thrive and survive in the market. The period it takes for the business to recover from the loss is when the emergency loan can be utilized and the business owners can take advantage of it.
- Sudden Increase in Expenses
In this case, the emergency loan can act as a protective shell wherein the funds from the loan can be used to meet the increasing costs and also in case of any unforeseen expenses. You can utilize the funds from the emergency loan so as to keep the business operations as they were functioning.
- Expansion Plans
In case you are thinking about expanding your business and taking it to a next level, the emergency funds can speed up the process. The emergency funds can take care of the various expenses that are associated with expansion such as marketing, branding or an increase in the number of workers in the organization.
- Natural Disasters
In case of any natural disasters, an emergency loan can act as a backup for you along with the insurance claim. The emergency loan can help you to set up the business again and start the functioning of the business as it was earlier.
Approval for Emergency Loan
There are a few prerequisites for an emergency loan. A few are listed below
- Good Credit Score
As we all know, a good credit score is one of the first and a very primary requirements for getting a loan from the market. To maintain a good credit score, timely repayment of dues is very important and being meticulous with the management of debt is also a primary requirement. A score above 600 is considered to be good and the loan processing is also quicker for this score.
- Proof of Income
It is necessary that the income should be proved so that the lender is assured of the repayment of the loan. The borrower should attach proof of the income source so that the lender while scrutinizing the loan application can easily get a knowhow of the quantum and the source of income of the borrower.
Since these loans are secured loans, there is some collateral that is compulsory for these loans. Proof of collateral is compulsory while applying for the loan. The collateral can be anything right from property to inventory. Equipment can also be pledged as collateral and can be used for the process of the loan application.
Repayment of Emergency Loan
If you avail of an emergency loan, it is expected that you repay the loan as soon as possible. There are a few methods that can be used to repay the loan faster
- If you make a bigger quantum of payments in one go. You will be able to repay your emergency loan faster. The bigger the EMIs the faster the loan repayment process.
- If you aim at paying the interest first, then you will be able to repay the loan faster. The loans like emergency loans have a greater interest component and thus if this is paid first, it can help you to repay your loan faster.
- Having a budget for repayment is the best solution for the payback of loans in a systematic and phased manner. This way you will not be burdened with the EMIs and too many payments at one go.
Advantages of PayDay Emergency Loans
If you plan to avail a PayDay loan, it can be of great financial assistance and you can be relieved in unforeseen times. It can help you cover all the costs and run your business smoothly. Some other advantages are
- The approval for these loans is very quick and the processing is also hassle-free. If the documentation is in place the loan gets cleared immediately
- The terms of the loan are flexible and thus can have the loan tailored according to your needs
- Even though the interest rates for these loans are high, they are available instantly for any use as compared to traditional loans.
Emergency loans can be very helpful in testing times and they are of great advantage for the business. However, the terms and conditions for these loans have to be read very cautiously. These loans are easily available but should be used once all other options have been exhausted.