Statistics show that only 5% of Indian adults opt for entrepreneurial ventures. One of the primary reasons surfacing for such limited entrepreneurial exposure is the shortage of funds, especially in the initial phase of a business. While many business owners opt for small business loans to fund the financing gap, not opting for the most suitable advance may lead them into further debts. Several factors like term loan interest rate, the tenor of the loan, and repayment flexibility should be taken into consideration before arriving at a suitable loan option.
However, individuals must do their homework and analyze market options before going for a suitable loan. The following are some tips that will help choose the right small business loan for your venture.
Consider the types of small business loans available Several term loans are available in India and choosing the right one often becomes challenging. It is further classified into several categories like machinery loan, working capital loan, MSME loan, etc. Business owners can opt for the one best suited to their purpose based on their funding needs.
Further, business loans come with varying tenors that can extend up to 60 months. Also, the term loan interest rates can differ from one loan type to another, making it essential to consider the costs involved.
Select the loan amount as per your repayment capacity – While availing of a loan is one of the most convenient ways to raise funds for a business; individuals need to ensure that a business loan does not pinch their budget.
Therefore, entrepreneurs must apply for the loan after checking the EMI amount and analyzing whether the same is within budget. Moreover, it will also help the lender gain clarity about the applicant’s repayment capacity as well as the purpose of borrowing.
Check your credit score before applying – A decent credit score is one of the determining factors for loan approval. Since this score indicates the credibility of the borrowers and his/her past credit behavior, lenders may offer better terms to an applicant with a high credit score. Lenders may also allow some flexibility on the term loan interest rate if negotiated. A score above 750 is what lenders look for while sanctioning unsecured advances.
Choose the best lenders – Once a business owner decides to avail of a loan, the next essential factor is finding the appropriate lender. Several reputed lenders in the market offer business loans with attractive features and competitive term loan interest rates.
For example, Bajaj Finserv offers these unsecured business loans at attractive interest rates as well as other beneficial terms like flexible repayment tenor, zero hidden charges, etc. They also provide pre-approved offers to make the financing process quick and convenient. These offers can be availed on several financial products like business loans, personal loans, etc.
Keep the required documents handy – Often, individuals tend to neglect the aspect of proper documentation. It is an integral part of the loan approval process. Lenders will ask for several essential documents related to the business, starting from all recent financial statements to GST invoices and tax certificates. You can submit all these documents online as well to get instant approval of the advance.
Reports reveal that only 11% of India’s total adult population is involved in total early-stage entrepreneurial activity (TEA). Given the immense youth potential of the country, the availability of sufficient financial assistance for business expansion and growth can only push this percentage higher.
In that regard, business loans can be financially beneficial, especially for beginners. However, additional advantages like competitive term loan interest rates, lower EMIs, etc. can ensure uninterrupted loan repayment. Therefore, consider these tips so that you can get your hands on the best possible loan option at affordable rates.