Business loan vs. Liquidating Your Savings: Which is the Best?

By October 15, 2018

In a business cycle, there can be periods when delayed payments from clients or changes in taxation may affect your cash flow. There are occasions when you may not have enough finances to purchase the machine you need or undertake expansion to promote growth. In such a scenario, you can either opt for a business loan or liquidate your savings to meet the need for funds. Read on to know which is your best option.

Consequences of availing a business loan

A large loan amount

Requirement of funds for businesses may vary from a few thousand to several lakhs of rupees. A business loan gives you a substantial amount to meet the varied needs of your enterprise.

For instance, you can avail a loan up to Rs.30 lakh with NBFCs at competitive interest rates to meet your short and long-term financing needs. A business finance comes with an easy eligibility criterion and requires no collateral.

Quick financing

This is another important feature of a business loan. With the evolution of non-banking finance companies (NBFCs), availing a business loan is quick and easy. You can apply for an online business loan by filling up an application form and submitting the relevant documents.

For example, a business loan is approved within 24 hours of application, with minimal documentation. Today, there are several apps through which you can apply for a business loan easily.

With pre-approved offers from Business loans along with a host of other financial products, availing funds is quick and convenient. All you need to do is share a few basic details and avail your pre-approved offer.

Ability to use funds as and when required

Business needs aren’t linear and there can be unexpected requirement of funds. New-age business loans such as the Business Loan come with a Flexi Loan Facility that allows you to borrow funds as and when required from the approved loan limit.

Also, with interest being charged only on the amount utilised and the option to pay only interest as EMI, with the provision of paying the principal at the end of the tenor, it irons out the repayment stress.

Consequences of liquidating savings

Hurting returns

When you liquidate your savings, you might be hurting returns on your investment, thereby giving it lesser chance to grow. For example, in case you are redeeming your equity mutual fund units in 3 years to arrange for capital, the move isn’t financially prudent as equities deliver the desired result when you remain invested for the long-haul, at least 10-15 years. Additionally, if you prematurely break your fixed deposit, it attracts a penalty.

Jeopardising life goals

Generally, savings are made to address essential personal life goals such as higher education of children, marriage and retirement. Liquidating them might jeopardise these essential goals and push them back by a few more years. Hence, it’s essential to keep your savings intact and let them grow so that you can meet critical life goals with utmost ease.

Thus, financial prudence calls for availing a business loan instead of liquidating your savings to meet diverse business needs.