Business Loan as a product has evolved over the years helping borrowers meet different requirements. The online Business Loan application has been a game changer for both borrowers as well as for lenders. It has helped to meet the rising demands of loan applications.
Collateral-free loans make a preferable option for borrowers, especially for start-ups as compared to other borrowing options. A Collateral free personal loan allows borrowers to get a loan without any collateral security. As a borrower, you have to pledge any of your assets as security for your loan approval. This gives an added advantage for borrowers who currently don’t have any fixed assets such as land, machinery, or similar assets.
Here are a few factors that you must consider before approaching a Business Loan lender:
Professional advice for planning
Lack of professional support and advice is one of the common mistakes a borrower makes while applying for a Business Loan. A professional advisor helps you in chalking down all the use cases of the additional finance borrowed from the lender. This helps you in planning your monthly budget to pay the EMIs on time. Hiring a professional advisor can help you grow the business in the long term by optimum utilization of additional funds.
Reason for Business Loan
Once you hire a professional advisor, the next step is to figure out the purpose of your loan. You can use the loan amount for various purposes such as meeting the working capital requirements, setting up a new office, buying a new plant and machinery, paying the salary of the staff, business expansion, etc. The financial requirement can be short-term or long-term. A better understanding of the purpose of the Business Loan will help you identify the type of loan that you will apply for. There are various types of Business Loans that lenders offer such as Business Loans for working capital, SME Loans, term loan, equipment financing, business loan for women, etc.
Know your loan amount
As there are various lenders in the market, the loan amount varies from lender to lender. Also, it depends on a few other factors such as credit score, and turnover of the business. Once you meet the eligibility criteria for the Business Loan, you can avail of the desired loan amount with a lower interest rate.
Credit score
Your credit score is one of the major factors that influence your loan amount as well as your interest rate. It helps in understanding the borrowers’ credit history. It tells you whether the borrower will be able to repay the loan on time or not. Creditworthiness is one of the major factors that a lender requires to determine before the final approval. The credit score ranges from 300-900 where 300 is considered a poor credit score and above 700 is considered a good credit score. A borrower with a good credit score has a higher chance of getting the desired loan amount with a lower interest rate.
Appropriate lender
Today, there are numerous options when it comes to lender. The lending sector has grown exponentially in the last few years. As a borrower, you can choose any lender including banks and non-banking financial companies (NBFCs). However, choosing an appropriate lender is a must. Before finalising your lender, you must do all the background verification that includes checking the website, going through various customer feedbacks and reviews, comparing the interest rates, your desired loan amount, visiting the branch, documentation process, loan application process, and every other minute detail.
Business Loan application
A Business Loan application consists of the business owner’s profile, financial statement of the business, business documents, business plan, and personal financial information of the borrower. You should ensure all necessary documents are provided on time. This will help in a faster loan application process – resulting in faster loan disbursal.
Conclusion
By considering all the above-mentioned factors, approaching a lender for a business loan will be a cakewalk for you. Also, before applying for a loan, you must keep an eye on the interest rates offered by the different lenders and choose the lowest interest rate. One of the popular examples is the business loan interest rate in India which influences borrowers who are applying for SME loans.
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