There are many things you should check when you are thinking of opting for a business loan. Whether online or offline, you might need to check with online EMI calculators or any other online sources that can tell you about business loans. Once you decide to get a business loan, you should research all the available financial providers compared to their interest rates.
Thorough research is the most critical part of the loan application process. It will help you understand the restrictions and opportunities the financial providers offer with their business loans. Choosing a suitable business loan is vital when you want to utilise the full benefits of your business loan.
Here are specific essential points which you should know before applying for a business loan:
Business Loan Types:
There are two essential types of business loans which you opt for; the financial institutions provide these loans according to your needs, which are:
Secured Business Loan:
If the financial provider gives you a loan when you submit collateral, it is a secured business loan. In this case, when you cannot repay the loan back, the financial provider can recover their invested amount by selling or auctioning your collateral.
When you are a first-time business loan seeker or startup, this might be a drawback for you. You will not have any assets to submit as loan collateral. Also, making your business asset as collateral will double the risk for you.
Unsecured Business Loan:
When you can get a business loan without submitting collateral, then it’s an unsecured business loan. In this case, the financial provider will be at high risk to offer you a loan. Because of this risk factor, the interest rate of unsecured loans is higher than that of secured business loans.
This is the best loan choice for a startup or small business owner who doesn’t want to risk their assets. Getting an unsecured business loan at lower interest rates is also possible when you have a good credit score and financial report.
Evaluate Your Business Loan Qualification:
Another vital factor you should know before applying for a business loan is the qualifications you should fulfil to get a business loan. Here’s why:
When your business loan amount exceeds your actual requirements, then you will have to pay unnecessarily. You will have to pay higher amounts as EMI, and the interest will also be high. Though you are utilising the business loan for your business purposes, you will also put your business under an unnecessary burden on your business.
But when you apply for a business loan when doesn’t meet your actual requirement, it will also harm your business. Your loan needs will not be fully fulfilled; you will also have to get another business loan to achieve the current one. It will highly make it challenging for you as it will increase your burden with higher interest rates. The second thing is that you cannot generate cash on time, which will make you lose the business opportunity for which you are looking for a loan. The whole process will impact you negatively.
Satisfying The Standard Qualifications:
You need to apply for a business loan to which your company can qualify. When you opt for a business loan, a request for your credit report will be sent to the credit rating agencies, for which they will revert with your credit report. Once the financial provider gets your credit report, they will analyse it and then decide upon giving you the loan or not. So your business credit requirement is a must for making you eligible for the loan. Keeping track of your credit score makes your loan process easy and improves your credit score.
EMI Calculations Are Vital:
When you are scanning for a business loan, your EMI calculations is the most vital factor. It will help plan your repayments according to your monthly EMIs to ensure no problem with your usual finances. Sometimes getting a loan is very easy, but repaying the EMI might be challenging. So make sure to calculate your EMIs correctly before opting for a loan.
For instance, when you apply for a business loan for Rs.5,00,000, your business can quickly repay the loan in one year. When you opt for an 8-month tenure, it will put pressure on your business finances. It will waste the benefit of the loan, making you miss EMI payments and lower your credit score.
Choosing The Suitable Financial Partner:
Both banks and NBFCs in India offer small and medium business loans for entrepreneurs. When you opt for a modern financial provider with your loan requirements, you will better know your working capital loan. Compared to banks, NBFCs offer customised business loans with low or no processing fees, quick approval, disbursal and easy loan renewals.
The business loan lending process can now be done entirely online. You can now ask your financial provider to customise your business loan as per your requirements. It will make it easy for your repaying plan and future security.
Business Loan Turnaround Time:
The turnaround time for the business loan is the primary factor that you should have in mind while choosing your financial provider. When you go to banks, they have a hectic process that you need to apply for a loan. Whereas when you consider NBFCs, your loan processing time is rapid and easy. Also, as most loan application processes have become online, it is now easy for borrowers to opt for a business loan.
When you are into a small or medium scale industry and want a loan, the most crucial thing you will be bothered about is your repayment of the loan. With the fast-moving technology and the booming help from NBFCs, we can now get flexible repayment schedules for our business loans.
When you get a commercial loan, there are many options regarding your repayment. You can select the one that completely suits your finances and lets you focus more on your business development.
A business loan is needed for investing in the growth of the business, so make sure to do a thorough check before choosing the right financial provider. The right business loan is the one, which suits your requirements. Currently, many online tools will help you access different loan products available from which you can choose. Keep in mind that choosing the right thing always leads to exponential growth.