Availing a business loan for small factory is a decision that must be taken after due consideration. Additionally, with so many loan lenders in the market, it is also not very easy to zero in on a lender. Most factory owners find is really hard to find the best business loan that will serve their needs in an apt way. In this blog, we have discussed how to determine the best type of loan, choose the right lender, and apply for a small factory loan.
Determine the type of Loan
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There are several options for availing a business loan for a small factory. The major two are secured and unsecured loans. The secured requires security against the loan amount and unsecured requires no hypothecation of security. The big business owners can avail secured loans since they are capable of offering security. However, small factory owners are generally not in a position to offer collateral.
Other than these two, the other choices of SME loan for factory are:
- Machinery loan- use to purchase or upgrade machinery and equipment
- Working capital loan- used to improve cash flow and working capital
- Capital loan- used to grow and expand business
- Flexi loan- new age loan that enables the borrower to withdraw funds any time and anywhere
- Term loan- availed for a predetermined time
All these types of loans can be both, secured and unsecured in nature. And they are distinguished on the basis of their purpose.
Choose the Right Lender
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Choosing the right lender for a business loan for the small factory is one of the crucial decisions. Right lender will offer the right loan product. There are several lenders operation in the market, such as traditional banks, FinTech companies (NBFCs), and regions specific lenders. Now, which lender will the right one for will depend if his product meets all the requirements or not.
According to us, the right lender is the one whose loan product has the following features:
Minimal Documentation: The lender who requires minimal documentation is the best one to avail a loan for business from. Less documentation means less hassle of arranging documents, getting their prints, etc.
Flexible Repayment Tenure: it will help the small factory owner to repay the loan in a repayment plan that suits his pocket.
No Prepayment Charges: Business is very uncertain. There are times when a business owner generates good profit and he is in a position to repay a loan before its tenure. In such a situation, he can prepay the loan without any prepayment charges.
Apply for a Business Loan for a Small Factory
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Applying for a business loan has become an easy task owing to the advent of technology in the financial sector. The factory owner in India can apply for a loan for business online without having to visit the office of the lender in person. The loan application is available online on the lender’s website. The business owner can fill the same there and submit.
In addition, the documents can also be submitted online without. The PDFs of the documents can be uploaded on the website. After these two steps, the business loan lender in India will process the application further. If the online loan application is processed, the amount will be disbursed directly in the small factory owner’s bank account.
Now that you know how to avail a business loan for a small factory and choose the right lender and loan product, you take a sound decision.