Small business loans are usually the ones availed by Micro, Small, and Medium Enterprises (MSMEs) to run their businesses smoothly and efficiently with adequate funds. It helps to bear the daily expenses and provides various incentives to run the units effectively.
An SME loan helps the business owner to finance his business-related needs, such as working capital, buy the latest business equipment/machinery, upgrade or expand the business, launch a new product, etc.
As there are several MSME units all over the country, they face fierce competition from each other while applying for an easy business loan – not all business owners can avail a loan.
However, the increase in the number of small business owners and subsequently demand for a loan has ushered in the emergence of different alternative and non-conventional lenders and lending institutions apart from the traditional banks. These loans lenders are becoming a popular and ideal choice among small business owners when it comes to quicker disbursal of business loans at cheaper rates, easy loan eligibility criteria, and flexible terms and conditions.
However, the steps of getting a small business loan sanctioned can be pretty tedious and emotionally and financially draining. It also means sacrificing valuable time and effort in acquiring a loan for the business instead of the business itself. Therefore, to save self from such undesirable situations, it is advisable to proceed systematically.
Following are some tips that might help in applying for a business loan online in India.
Table of Contents
Set your Business Goals
The borrower needs to be prepared with a detailed plan, including business goals and how he plans to utilise the funds provided to him towards achieving those objectives/goals. He needs to assure the lender that he really needs his assistance and will make good use of the funds. Otherwise, the lender might find a better use for the funds with someone having more convincing business plans and ideas.
Find the Correct Loan Type
Most business owners are unaware of the fact that there are numerous types of business loans which are designed as per the specific requirements. Consequently, they often end up availing the wrong type of loan from the wrong lender. The business owner needs to do his homework about the appropriate loan for his requirement so that he appears confident to the lender. There are different types of business loans, namely machinery loans, term loans, line of credit loans, working capital loans, invoice financing loans, short-term loans, medium-term loans, etc. Securing the right loan will also prevent from borrowing more than the requirement and often the business loan gets repaid before the estimated duration.
Find the Appropriate Loan Lender
When it comes to availing business loans, there are plenty of options available, like banks, NBFCs, online lending institutions, and P2P lenders, to name a few. All lenders have their pros and cons. Weigh their advantages and shortcomings before zeroing in on a lender. Do a thorough study of each of the lenders about their eligibility criteria and terms and conditions as well. Finally, select the one befitting the needs.
Check Eligibility Criteria
After shortlisting the favourable loan lenders, check whose eligibility criteria can be met. There is no need to be worried as many NBFCs are operating in the market, like us, that has some basic requirements. We have a basic eligibility criterion which is easy to meet. The most obvious of the criteria is the personal and business CIBIL score. Having a good CIBIL score opens plenty of doors for borrowing. The more creditworthy the business owner is, the more pleased will be the lenders while providing the loan. The business owner can even leverage the spotless CIBIL history to secure a loan at much cheaper rates than others. Other factors essential for securing a business loan are good business vintage, annual revenue and profit generated by the business, outstanding loans, etc.
Prepare the Documents
Make sure that all the documents are ready to substantiate the claims. Nothing works better and quicker than providing the creditor with the exact documents he wishes to see in sealing the deal. On the contrary, the business owner carries the risk of losing face in front of the lender if he is unable to procure the required documents despite fulfilling the eligibility criteria. Moreover, it might be tough to recover the lost impression in the future. Hence, this can make or break the chances of landing a deal significantly.
However, if the business owner fails to meet the terms and conditions, then don’t get disheartened yet. There is still hope. Work the way through the hurdles and improve the business and personal image steadily!