Small business loans have become a necessity for small business owners in the today’s time where the business owner always require to be on his toes unless he wants to concede all the competitive advantage to other players in the market.
About Unsecured Business Loans
An unsecured business loan offers a significant degree of flexibility to the business owner regarding the financial resources for the business. He need not use his savings or borrow from someone to meet urgent business expenses that might come up unexpectedly. Having ready-to-use access to an external source of funding, like small business loans, offers an entrepreneur the freedom to do things his way. Besides, he can make the most of the business opportunities that are currently present in the market.
When a business owner pays his suppliers and workers, his utility bills, and all taxes on time, they all add up to excellent goodwill in the market — it which offers him excellent leverage with the customers. Also, there is no need to offer collateral to avail an unsecured business loan. So, a small business owner can use this option when he doesn’t have collateral to offer, and his business is new in the market.
From where to avail Small Business Loans?
Various financial institutions with excellent MSME loan offers are operating in the market. Banks and NBFCs are the three major categories of financial institutions operating in India. Their working style and product offering are very different from each other.
With the rising complexities of running a business enterprise, the business owner obviously doesn’t have time to visit the bank branch every day to follow up regarding the business loan application status. This is where online lending companies come into the picture.
They are a special type of Non-Banking Financial Corporations who offer a wide range of unsecured business loans through. There is no need to visit any branch or follow up with anyone as their entire process is online. The applicant can conveniently apply for a small business loan from the comfort of his home. Besides, he can track the business loan application online itself.
If a small business has a turnover of more than Rs. 10 Lakhs, then it can avail an instant unsecured loan of Rs. 7.5 Lakhs to meet any business-related requirements. The NBFCs follow a paper-less procedure, wherein the business loan application is approved and disbursed within a few working days. The maximum repayment tenor that the applicant can avail is 36 months. Moreover, he can choose to pre-pay your business loan amount without incurring any additional charges after the successful payment of 6 EMIs.
Applying for an unsecured MSME loan with an online lending company is very convenient. The applicant just needs to provide some necessary information and PDFs of your documents either through their website or mobile app.
How to Check Small Business Loans Offer?
When an applicant applies for a small business loan, it is a big responsibility that he is signing up for. He agrees to receive the amount now and then repay it in monthly installments (EMIs) along with interest. As such, every month, he must make a payment from the financial reserves.
Therefore, it turns vital for him to check the following seven aspects of a business loan offer before taking the final decision:
- Amount available: he must ensure that the amount available to him under an MSME loan offer is adequate to meet all the requirements. He must not borrow the amount if he doesn’t need it. It carries an interest cost, and it will not be of any use if it is lying idle in the bank account and that the applicant is paying interest against it.
- Repayment Tenor: When the applicant opts for a repayment tenor, he needs to weight in the repayment capacity against the interest cost being levied. The longer the tenor is, the higher is the interest payments. And shorter the tenor is, the higher the EMIs are.
- APR vs. Interest Rate: Rather than the interest rate, he must check the APR of a business loan to get an accurate estimate of the payments he would making towards the loan account. APR incorporates all the expenses that he must incur towards a loan, in a given year.
- Penalties: Check the amount of late-payment penalties as well as any other charges applicable against the loan, such as processing fee.
- Foreclosure Charges: the small business should opt for a business loan offer that allows him to pre-pay or foreclose the business loan account without incurring any additional charges. This would help save a lot of money on interest expenses.
- Top-up Loan: Check if an option for a top-up loan is available.
- Processing Time: Ensure that the processing time is well within the time frame, if it is going to take longer to process the loan application than he can wait, it might be better to look for other options.
It is important that the business owner carry thorough research before finalizing a business loan offer to ensure that he does not regret the decision later.