Securing funds is often a key step when operating or growing a business, and applying for a Business Loan is a common way to access the required funds. Entrepreneurs can easily apply for a Business Loan online by following a few simple steps. Just like a Personal Loan fulfils one’s personal requirements, a Business Loan helps in the growth of a company. In this article, we have shared a list of things an entrepreneur should consider before applying for a Business Loan.
Things to Consider Before Requesting a Business Loan
A Business Loan can help your business meet its current requirements and ensure long-term success. However, navigating the loan application process can be daunting, especially for first-time borrowers. To help make the process more manageable, this article will outline some essential things to keep in mind when applying.
- Identify the Reasons Behind Taking the Loan
Understanding the necessity for applying for Business Loans is crucial. Generally, entrepreneurs take Business Loans to build working capital, invest in marketing, buy more inventory, recruit more employees, etc. So, being clear about specific business requirements is crucial in obtaining the right amount of loan. Entrepreneurs can choose to apply for Business Loans by the Government or a reputed lending institution.
- Type of Loan
Business Loans generally come in customised forms. So, you can easily find various financing options according to your business requirements. For instance, you can opt for a working capital loan to fulfil your business requirements. Likewise, equipment financing will help you acquire machinery and plants. Hence, you be clear about the type of loan you want before applying for one.
- Collateral Capacity
Those looking for a higher loan amount and longer repayment tenure prefer to take a loan against property for their business. However, the majority of businesses prefer unsecured funding that comes without any collateral requirement. Unsecured Business Loans are approved faster than secured loans which require comprehensive verification.
While an entrepreneur can apply for a Business Loan online, the verification requires in-person verification of documents. Once verified, the approval and disbursal are quick.
- Credit Score
The credit score plays a significant role when you apply for a Business Loan. Financial institutions evaluate your credit score while considering your loan request. A credit score of 700 helps entrepreneurs get a Business Loan without any difficulties with favourable terms.
- Repayment Terms
Reading the repayment terms before you accept the offer for a small Business Loan is crucial. You must review the documents carefully to see whether the financial institution offers repayment flexibility. Business Loans have a repayment tenure of 12-36 months, so consider the suitable tenure as per your repayment capacity.
- Know the EMIs
Before taking out a loan, it’s important to understand the payment process, including the frequency of payments, the amount of each payment, and how payments are made. You can use a business loan calculator to calculate the EMIs before applying for the loan and plan your repayment schedule.
Knowing the EMIs is crucial for creating a budget and managing cash flow. Make sure to choose an EMI that aligns with your business’s income cycle and allows you to make payments on time.
- Keep an Eye on the Interest Rate
Small business owners need to pay a specific interest rate on the approved loan amount. Whether they take a Business Loan from the Government or an NBFC, checking the interest rate is crucial for the borrower, as it adds to the total cost of the loan.
To get the best loan offer, research and finalise the best lending institution. You can visit the official websites of different financial institutions to learn everything related to Business Loans.
- Disbursement Time
Disbursement time refers to the time it takes for the lending institution to disburse the loan amount to your business’s bank account. This time can vary depending on the lending institution and the type of loan applied for. If you need the funds quickly, prefer applying online after reading all the loan-related documents, so there is no gap in the verification process.
Conclusion
Knowing the process is crucial before applying for a Business Loan. So, research and finalise the best loan offer.
Also, take your time to consider if it will be a viable choice to obtain an unsecured Business Loan for your company.
Most importantly, use a Business Loan EMI Calculator to calculate EMIs before applying for the loan online.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.