How Do I Choose the Best Business Loan?
Small Business Loan – Importance of Choosing the Right One
When you are considering taking a business loan, there are a lot of things that you check out, both online and offline. One might check out online EMI calculators, ask friends about online business loans, visit the websites of online loan providers and do a comparison of business loan interest rates. This due diligence is an important part of the loan application process and helps you understand the limitations and opportunities offered by different commercial loans.
At Lendingkart, we believe that choosing the right business loan is very important for MSMEs as it helps them in drawing out the full benefits of a loan. Here, we are sharing the points to look for when applying for a business loan online.
Type of Business loan
Before we being, let us have a look at the two types of business loans that you can take from marketplace lenders and banks.
Secured Business Loans: These loans are given in lieu of collateral from the borrower. So, even if the business is unable to pay the loan amount back, a lender can recover the money by selling or auctioning the asset taken as collateral. The drawback for first-time business loan seekers and startups is that generally, they do not have an asset of value to get a loan. Moreover, even if a new business has an asset of value, taking a loan against it doubles the risk for them.
Unsecured Business Loans: These are business loans without security or collateral. Here, the risk is borne by the lender. However, unsecured business loans do have slightly higher interest rates than secured business loans but not overly so. Unsecured business loans are best suited for small business owners who do not want to risk their personal assets. Moreover, with a good credit rating and financial report, a business can get unsecured business loans at lower interest rates as well.
Review Your Business Loan Requirement
Another thing that you should note before applying for a business loan is the actual requirement of capital for your business. Here’s why –
- If you apply for a business loan in excess of the actual requirements, it may lead to wastefulness. Also, the higher the amount the greater the EMI and interest repayment. So, while you will be able to fulfill the purpose of your business loan, you will also be generating unnecessary financial strain on your company by taking an excess business loan.
- On the other hand, applying for a business loan below the actual requirement is also detrimental for your enterprise. One, your need for investment will not be met and you will have to apply for a second business loan or you will be borrowing money at higher interest rates from a private lender. Two, by not generating the cash in time you may lose a business opportunity for which you took the loan and the whole exercise will become a lost cause.
Fulfilling the Basic Criteria
It is very important to apply for business loans that your company can easily service. When you apply for a loan, a hard query is sent to the credit rating agencies. Too many hard queries can bring down your overall credit score. Therefore, applying for a business loan for which your company is completely eligible is quite important. It will not only ensure quick disbursals but will also help you build your credit rating further up.
Getting the EMI Calculations Right
Another important factor when taking a business loan is calculating the EMIs and planning your repayments accordingly. Sometimes you might end up taking a business loan which your business can easily repay and yet miss out on EMI payments. This happens when you do not calculate the EMIs correctly.
For example, you apply for a business loan of ₹10,00,000, which your business can easily repay in 12 months. However, you erroneously opt for an 8-month EMI schedule, which stretches your resources, wasting the benefits of the loan or even leading to missed EMI payments.
Selecting the Right Lending Partner
While banks are a common source of medium and small business loans for entrepreneurs in India, opting for a modern business financing institution might be a better idea for getting working capital finance. Non Banking Financial Companies offer several benefits such as low processing fees, short turnaround times, and easy business loan renewals.
At Lendingkart, we have simplified the loan application process by making it completely online. Lendingkart interest rates are customized based on business prospects of every individual applicant, thus making it easier to get a quick personalized business loan online.
Business Loan Processing Time
The processing time or business loan turnaround time is one of the most important factors to consider when taking a business loan. Banks often have a long process for approval and disbursal of funds. Moreover, banks are still stuck in the age-old methods of filings and paperwork which delays things even more. For example, upon approval of a business loan, the bank will issue a draft in your firm’s name which you will have to deposit in your business account and wait for the credit. So. if you are looking for an instant business loan, applying with a bank may not serve your purpose. Here, selecting a lending partner which can disburse funds electronically via bank transfers will save you both time and money. For example, Lendingkart Finance disburses business loans online within 3-Days of loan application and approval.
Flexibility in Repayments
A business loan offered with the option of a flexible payment schedule is a boon for MSME loan applicants. A commercial loan that lets you choose from a variety of repayment schedules gives you the freedom to focus on business development rather than on payment due dates.
Lendingkart Finance lets you choose a customized repayment schedule so that you can repay your business loan comfortably. If you are doing great in your business, you can even prepay the full loan amount without any pre-closure charges.
A business takes a loan to invest in its growth, therefore selecting the right business financing product remains critical to a business’s success. Today, there are a variety of online tools which help you assess the various loan products available online and make an informed decision regarding a new business loan. Also, by selecting the right financial partner, you can grow your business exponentially.
Visit our website www.lendingkart.com for a quick unsecured working capital loan quote.