A capital loan is one of the most standard measures of financing a small business and its various stages. As of January 2020, the credit exposure of MSMEs in India stands at Rs.17.75 lakh crore.
Credit financing allows businesspersons to mitigate numerous monetary obligations without bearing any substantial financial strain at once.
For instance, in the seed stage of a business, individuals can utilise it to lay the foundations of starting an enterprise, such as getting it registered, renting out an office space, etc.
An individual can also use a business loan to tide over the losses enterprises typically face in the start-up stage.
Similarly, they can use a capital loan in the expansion stage of a business to address the ancillary costs of expansion like hiring additional workforce.
Lastly, they can also use a business loan when a company is in a declining stage by investing in adjacent avenues of revenue generation.