Running your own business after leaving your job is one of the most incredible feelings that you can ever experience in your life. You are no longer confined to the 9 to 5 routine or at the mercy of your manager, who might send you on a tour even if you are not well. With having your own business, you get a lot of flexibility. You can decide your working hours, you will earn as hard as you work, there is no need to be answerable to anyone, and you can freely do the things your way. But doing everything to get a new business started is not that easy, you need to arrange for a source of finance to fund your dreams.
If you have adequate savings in your account, you can use them to get your business started. Still, after some time, when your investment has been absorbed in the business, and your payments are being delayed, you must explore for an alternate source of finance. There are some options wherein you can get the money required instead of a stake in your business. Still, it is not a desirable option because then you will lose the independence to do things your way and would be answerable to other partners for each action of yours.
In such a situation, the best option for you to access the requisite funds is to avail an unsecured business loan. There are several financial institutions operating in India, who offer MSME loans to small business owners in need.
Where to Avail an Unsecured Business Loan From?
There are three major types of financial institutions that operate in India, namely, Banks, NBFCs, and Online Lending Companies. Out of the above three options, online lending companies offer you the maximum flexibility and convenience while availing MSME loans.
Online lending companies conduct the entire process for business loan approval through their website. Therefore, you need not make endless visits to any branch office of a bank. All you need to do is access their site on a computer or download their app on your smartphone. Then you must follow the process specified online which would require you to provide necessary KYC information along with the PDFs of the required financial documents. They follow an independent credit evaluation process along with CIBIL to get a holistic view of your financial position and thereby increase the chances of your business loan application being approved.
If your business has a gross annual turnover of more than Rs. 10 Lakhs, then you can avail an unsecured business loan of up to Rs. 7.5 Lakhs from an online lending company, which can be repaid in a maximum period of 24 months. You are free to use the money as per your discretion and need not inform the lender regarding the end usage of the money.
Things to Avoid while Availing Unsecured Business Loans
While you are preparing your application for an unsecured business loan, there are certain important tips for you to follow, which will help your application be successful in the first instance itself.
- Not Checking Credit Score: Your CIBIL score is an essential factor affecting your eligibility for a business loan. Sometimes, it is possible that some error might have crept in your CIBIL report. So, before you apply for a business loan, make it a point to check out your credit report and raise disputes regarding any errors.
- Not Checking Bank Statements: Your last one-year bank statement (current account and savings account) must have a healthy balance without any debts on account of balance non-maintenance charges. Also, ensure that there are no instances of cheque or EMI bounce.
- Not Preparing Financial Documents: Your lender is going to assess your eligibility for a business loan based on your financial documents. So, you must keep all the documents specified by the lenders readily available. If possible, scan them and keep the PDFs on your Email for ready access.
- Now knowing your Requirements: You must apply for only as much amount as you require. The money that you are going to borrow carries an interest cost, so you must borrow only as much amount which is required. Always make sure that your eligibility is higher than the amount you have applied for.
- No Knowledge of Loan Products: There are various lenders offering different business loan products. So, you must conduct thorough research regarding the various business loan offers available to you and then select the one which meets your requirements in the best possible manner. This will enhance the chances of your application being approved in the first instance itself.
Availing an unsecured business loan would be convenient and effortless for you if you avoid all the points mentioned above and prepare your MSME loan application accordingly.