Contrary to what people think, running your own business is not an easy task. It is a far cry from what general perception is that you just need to give orders to people to work and then only have profits to take care of. Whereas in reality, it is exactly the opposite. You need to take care of so many aspects of the business, ensuring that everything goes on smoothly without any hassles. You have to manage people and resources efficiently to ensure that you get maximum returns form your efforts. After all, you do not have limitless resources like big corporations; you have to make do with whatever you have got.
As a matter of fact, you have to invest all your savings initially to get the business started and need to keep infusing the funds as and when required. Ideally, the business venture must be self-sustaining, but the reality is not so ideal. Your payments might get delayed for one reason or other, which leaves you in the lurch.
The expenses that you have will not take care of themselves; it requires you to take the lead and explore alternative sources of finance. One of the most popular and optimum funding sources that you can opt for is availing a personal business loan from any of the several financial institutions operating in the country. These institutions offer unsecured business loans to small business owners as per their MSME loan eligibility.
About Business Loans
Business loans are those unsecured business loans which are offered by financial institutions for small business owners for various business-related requirements, such as machinery loan, term loan, working capital loan, etc. The money borrowed as the business loan must be used for a business-related purpose only and has to be repaid in EMIs as specified by the lender.
With the rapid assimilation of technology in the financial services sector, online lending companies have emerged as a preferred choice of business owners looking for small business loans. These companies operate exclusively through their online platforms, such as a website or mobile app. They follow a paper-less procedure, wherein you have to submit only scanned copies of your KYC and financial documents to process the application. With their efficient working style that is based on minimal documentation, they can process your business loan application within a few working days only.
These online lending companies offer you an unsecured business loan between the ranges of Rs. 1 Lakhs to Rs. 7.5 Lakhs based on your MSME Loan eligibility. You need to have an annual turnover of more than Rs. 10 Lakhs to be eligible for this facility. You have the option to choose an extended repayment tenor of between 12 and 36 months. These companies also offer you the flexibility to foreclose your business loan account. They conduct an independent credit evaluation process to get a holistic estimate of your financial strength, in combination with CIBIL. It helps enhance your eligibility for an unsecured business loan.
Tips to Enhance MSME Loan Eligibility
Lenders in the present scenario follow a stringent eligibility criterion to assess every application for a business loan. It is therefore important for you to cover all the important aspects of a business loan application to ensure that your application is approved in the first instance only. Here are some tips to enhance your MSME loan eligibility:
- Check Your Credit Score:Keep a close eye on your credit score (CIBIL) if you are planning to apply for an unsecured business loan. Ideally, your credit score must be more than 700. But if it is below this level, then you must work towards improving it before applying for a business loan.
- Boost your Cash Flow: Any lender would ascertain your repayment capacity based on your cash flow. So, make sure that you can realise the payments from your customers on time. You can also use cash sales and offer a cash discount to customers to realise your payments quickly.
- Pay Taxes on Time: You need to make sure that you pay your taxes on time, such as Income Tax, GST, Sales Tax, etc. This will show you as a responsible borrower and would enhance your eligibility for a business loan.
- Prepare all Documents: Every lender has a list of documents that they have published on their website. You must study this list and ensure that you have all the documents ready with you because it might otherwise cause unnecessary delays.
- Keep your Credit Utilisation Low: Lender usually consider 40% of your monthly income to ascertain your repayment capacity for EMIs. Make sure that you keep your debt exposure low to enhance your eligibility for an SME loan.
With these tips, you can significantly enhance your eligibility for a business loan and take your business to greater heights without worrying about the source of funds.