To achieve faster growth, businesses need financial clout. Adequate finances help businesses to achieve their expansion and growth aspirations. A business loan is the most obvious route to achieve this. However, combining the backing of a business loan with the operational expertise of a strategic partner can further accelerate business growth.
This is why Joint Ventures (JV) are popular in the business world and has remained so for nearly a hundred years. Together, businesses have benefited from the combined finances and sharing of business loan EMI and other expenses through JVs. Since its inception in 1920s America, JVs have assumed different shapes and forms. However, each of these types of JVs has helped businesses to achieve their goals, individually and together.
- Equity-based JV sees the formation of a separate legal entity through the agreement between the partner businesses. This type of JV is quite prevalent in the insurance sector in India. Tata-AIG, ICICI Lombard, and Max Bupa are all examples of the coming together of two companies to form a completely new entity with a specific business agenda.
- A function-based JV is a collaboration between parties with a different set of skills. These skills together can be used in a particular project or business endeavor. Function-based JVs may be contractual or equity-based. Participants can combine to negotiate better business loan interest rates through their combined venture.
- Vertical JVs are formed between buyers and sellers to achieve quality and consistency in service or product delivery. The purpose of this JV is to achieve economies of scale and streamline product delivery. These JVs achieve cost-saving and better quality through the dedicated operations of the venture. These JVs arrange finances solely for the partner-customer requirement and get favorable business loan EMI calculator results because of their purpose-driven financial needs. An important purpose of vertical JVs is for the vendor to avoid contract uncertainty concerning the buyer.
- Horizontal JVs are the coming together of companies engaged in the same line of business; they may even be competitors in the market. It is a market consolidation move that aims to reach out to the common customer base in an improved manner and with a bigger focus. Since this is formed between competitors, they have a higher risk of disputes and opportunistic maneuvers.
While a smooth credit flow is possible with a high business loan eligibility, entering into JVs improve the chances of better business loan interest rates. Apart from the financial support of a business loan, the operational expertise of a JV enables businesses to achieve their goals faster and more sustainably.
