What is the process to get a loan? Just go, fill in a form, and a money lender is ready with the amount you have asked for. Do you think any institution will give you loans so easily? Of course not. You have to look for all the possible schemes and search for the option that best suits your requirements and then proceed with the application.
Let me tell you how to get funding for your business. But first, you should have good knowledge about the different types of loans provided by any financial institution and for what purpose. Do you have any idea of business loans?
These loans cater to all the financial demand of business. Business loans are further bifurcated into two types – secured and unsecured.
What Are Unsecured Business Loans?
Unsecured business loans are the loans taken by the borrower without any collateral. The borrower does not promise any of his assets or property.
What Is The Eligibility Criteria?
The criteria many times differ from lender to lender. However, most often, the following factors are considered:
- Age: The age considered by most lenders is between 24 to 60 years.
- Current Business Experience: If your business has attained stability and is showing signs of growth, at least for the past 2 years, then you will be considered for the loan. Some finance companies provide a loan amount that makes up to 60 to 80% of your median annual profits.
- Total Business Experience: A lender will only prefer your application if you have been involved in sustainable business for at least 2 years.
- Working Capital for Business: Financial service companies provide unsecured loans for your business. If you come under the eligibility criteria and have given relevant documents, you will be termed eligible for a business loan without giving away your assets.
What Is The Interest Rate Drawn On A Business Loan?
Interest rates on a business loan offered by any lender are competitive, depending on the eligibility of the applicant:
- Minimum repayment tenure can be 12 months
- The minimum loan amount sanctioned is mostly Rs. 1 lakh
- You can receive a maximum loan up to Rs. 7.5 lakhs
- The maximum repayment period can be up to 36 months.
What Are The Features Of A Business Loan?
- Collateral Free Loan: Lender does not ask for any collateral from an entrepreneur/applicant. The applicant need not provide any personal assets like a car or house to avail an unsecured business loan. These loans are particularly beneficial for small businesses that do not have sufficient assets to give as collateral.
- Finance up to 7.5 Lakhs: Lenders offer fund amounts of up to Rs. 7.5 lakhs, to fulfil all of the short-term, intermediate-term, and long-term goals of your business.
- Flexible Tenors: They come with flexible tenors ranging from 12 to 36 months. This permits you to pay according to your cash flow.
- Pre-approved Offers: If you avail an unsecured loan facility from any financial institution, you might be eligible for exclusive pre-approved offers or complementary offers, like the reduction of rates, top-up loans, etc.
- Online Account Access: This is by far one of the most common yet most helpful features that enable you to access your account from any corner of the world; it is like ‘wherever you go, we follow.’
How To Get Your Unsecured Loan Approved?
Like any other loan, in business loans too, individual’s creditworthiness is analysed by scrutinising the repayment capability, financial history, business records, and stability.
Following are the detailed parameters to be fulfilled to get or apply for the required business loan.
- You must be ready with an impressive business plan.
- Make sure you fulfil the eligibility criteria and possess all the required documents.
- You must have a decent credit/CIBIL score ranging between 700-900 points.
- You must be thorough in paying your existing debts to gain the confidence of lenders.
- As you are opting for a business loan, you should maintain information about the company’s financial situation, present and past, including a cash flow statement.
- Carry sufficient funds, in case the lender asks you to put forward some amount in advance.
- As you are applying for a loan for new business, you must majorly focus on the ideas and presentation.
What Are The Steps Involved To Apply For A Business Loan?
All entrepreneurs mostly have to follow the below-mentioned steps to procure loans from any NBFCs.
- Check eligibility: Check if you fulfil all the eligibility criteria specified.
- Application: This can be done online within 5 to 10 minutes
- Upload documents: Upload all the relevant documents mentioned, like most recent bank statements.
- Receive funds: Once you have followed all the steps mentioned above, you will receive funds within two to three business days, after signing an agreement with the lender.
Tips to follow
- You should always possess an appropriate estimate of the working capital.
- First, get a rough quote on loan by filling in the details from a free quote.
- Compare business loan from various finance companies, to check the interest terms and conditions, rate, procedures, formalities, and hidden charges if any.
Although the application process has only four steps, you have to keep your research ready before applying for a business loan. Apply for unsecured business loans at any NBFCs to receive sufficient funds and fulfil the business dream of your life.