There are various reasons why small business owners look for business loans. Some of the reasons can be to buy new machinery, pay wages, and expand the existing business or to bring down the current debt.
Since the demand for small business loans is increasing, finance companies are making it easier to apply and get instant small business loans.
In India, small business plays a significant role to push the GDP in the higher profit rate. Presently 95% of the industrial units in the country consist of small and medium businesses.
Moreover, small businesses provide immense job opportunities for the younger generation. This shows that the weight of unemployment the Indian economy is facing is lifted by small businesses.
To make this success, offering easy business loans to the small and medium-sized business is essential. Although finding, applying, and getting loan approval is still a hurdle, being prepared with the right documentation can make it easier.
In India, a reputed finance company would offer small business loans up to Rs. 5 Lakhs with the repayment tenure of 12-24 months. This is a reasonable timeline for a business owner to payback.
Before we know the steps on how to get small business loans, let us check different types of small business loans.
Types of Loans Available for Small Business Loans
Working Capital Loan
This loan is usually provided to businesses to keep running without any halt. The borrower can apply for this loan without any collateral and enjoy less rate of interest.
Finance companies set a minimum loan payback period like 12-24 months and use only for the business purpose.
This type of loan is available for short-term purposes. Such loans are further extended to exporters dealing with a different currency.
The maximum tenure for the payback of the term is 2 years, entirely depends on the lending company. Moreover, there will be variations in loan interests depending on the loan tenure.
Also called an unsecured loan, the machinery loan is offered to business owners to invest in new machines.
If your operation needs better tools than the existing one, applying for the machinery loan is the best you can go with. The machinery loan is available without security and is ideal for small companies.
Cash Credit Facility
A small business owner can apply for the cash credit facility against the current assets. The owner has the freedom to pledge multiple assets in the form of collateral.
5 Steps to get Small Business Loans
When you plan to seek a loan for your business, you need to be equipped with enough information on how to approach the lender. Thankfully, you don’t need to wait for days to submit the application and get the loan. Reputed finance companies, after getting the documents verified, will disburse the business loan within 3 days.
Here are 5 steps on getting small business loans without much hassle.
#1. Finding the answer for the Loan Requirement
There can be many reasons why you will need a business loan. Whether:
- To start a new business
- To manage day-to-day expenses
- To grow existing business
- To have a finance backup
Once you get the answer to the above questions, you can go ahead to seek the small business loans from any of the numerous finance companies in India.
#2. Deciding the Type of Loan
As mentioned above, there are different types of small business loans available; you need to decide which one you want to apply for. If you wish to buy new tools or machines, pay-out wages or wish to expand your current business, you can borrow the loan accordingly. A company running its business for the past few years and carrying good credit history gets enough finance options, including term loans, machinery loans, working capital loans, etc.
#3. Finding the right Business Loan Lender
When you opt to apply for a loan for your small business, you will come across enough lenders lending the money with exciting benefits. From NBFCs to finance companies, there are several lenders offering different types of loans to small businesses. Better to check at least 3 finance lending companies in India and compare the interest rates, amount offered, and the tenure to payback. Once you decide the lender, you can go ahead to get the loan.
#4. Knowing the Credit Score
Knowing the credit score is essential that will help you to know if your business can get the loan. You can get your credit score free online and apply for the loan. The minimum credit score you must have is 700 out of 900. Banks and financial institutes do check the credit score before giving you the loan. If the score is right, you can get fast small business loans.
#5. Gathering Documents
This involves your eligibility criteria. The credit score too falls under the requirements, and being ready with the document is essential. Some of the eligibility criteria for small business loans are:
- Previous years’ sales to be at least Rs. 5 lakhs or more.
- Presenting last year’s ITR which should be at least Rs. 1.5 lakhs
- Should have business premises with enough assets
- Proof of identity – PAN card, business and house address proof, and bank statement for nine months
- Commercial and house property documents
Connect with the financial institutions that offer SME loan or small business loans to know the documents required for completing the procedure.
Where can you search for Small Business Loans?
For easy business loans, the best is to go online and search for a reputed finance company. Doing online research can help you know how easy it is to get small business loans. Reputed finance companies are transparent about their service and eligibility criteria. With minimal documentation and a faster process, the borrower can get business loans without much hassle. Read reviews about other borrowers before finalising.
The ultimate aim is to get easy loans to push your business ahead and help the GDP of India grow at a faster rate.