Small business loans are important for small businessmen in India to run their business. It is true that commencing a business venture is not an easy task. A good idea is certainly the prime requirement to starting a business. But the aspect that helps you in running the business successfully is to stick to the idea no matter how many odds you face.
As you toil hard to run the business to its full potential and arrange for funds, there are times when you will find availing small business loans the best idea for your business. And when you decide to avail a loan for business, you find yourself surrounded by some business loan myths. Read on to know about 7 business loan in India myths that must be busted.
Small Business Loan is a Long Process
also read: which are the best business loans for smes?
With the help of digitization in the Indian financial sector, availing small business loans for women or men is just a matter of a few working days. You can apply for small business loans online without visiting the lender’s office in person. In addition, you can also submit documents online and also acquire all the information related to loans online.
This saves a lot of time and also makes the loan approval process faster. The lender processes your application within a few hours after your loan application submission and approves/disapprove the application within a day or two. If your application is approved, the funds are disbursed within a couple of days.
CIBIL Score is the Prime Eligibility Criterion
Traditional lenders like banks give a lot of weight to CIBIL score. However, there are other lending options as well, such as NBFC and online lenders. Although these alternate lenders do consider CIBIL score, they consider other factors as well. The following are these factors:
- Business Plan
- Business’s financial situation, such as Profit N Loss account and cash flow
- Business vintage
Some alternate lenders have their own credit evaluation process as well. It increases the chances of getting the loan application approved. Nevertheless, it is true that a good credit score enhances small business loan eligibility criteria and helps the business get the best possible rates.
Collateral is Necessary
Small businesses in India differ from their bigger counterparts in terms of their assets. Most often, they do not have assets to offer as collateral to fulfill business loan eligibility. So, they face rejection while availing a loan. This makes the small business owners feel they cannot have access to loans.
However, there are numerous lenders in India that offer loan for business without security. So, the small business owners do not require to hypothecate asset to get their loans approved.
Online Lenders are Risky
also read: why is choosing the right lenders important?
Many small business owners think that online lenders are risky. However, as opposed to what they think, online lenders are absolutely safe to avail a small business loan in India. All you need to do is to perform a proper search online and choose the one that is registered with the Reserve Bank of India.
Additionally, you can also compare loans online and choose from the varied option available.
Small Amount Loans are not Available
NOT CLEARING DOUBTS KILLS MORE DREAMS THAN FAILURE!
Unavailability of funds should never be a roadblock to a successful business venture. As opposed to what most small businessmen in India think, small loans are also available. Many lenders have loan tickets of INR 1-5 lakhs. You can avail loans with proper documentation and a strong business plan.
Interest Rate is the Most Important Factor
Business loan interest rates are an important factor. But it is not the sole factor that must be considered. The business owner not only has to pay interest cost but other costs as well. Such as processing charges, foreclosure penalties, and other charges. So, while availing business loans, the businessman must run a check on other factors as well.
You can take the help of professionals and also run a background check on them.
No Loan Option Available if Rejected by Banks
Though many owners think traditional lenders are the best and only lenders for loans for business. And they take it as if their loan application is rejected by them, there is no other option to avail small business loans from. However, not such is the case in reality.
There are lenders such as NBFCs that meet the business loan requirements of the MSME sector. In fact, RBI has also estimated that only 40% of the loan requirements of the SMEs is met by banks. The other 60% is met by other financing options.