How to Get a Small Business Loan for a Startup

Small Business Loan to Start a Business

For a new entrepreneur, one of the biggest hurdles to resolve and overcome is the need for capital. Funds are critical to any business venture. Finding ways to raise money can sometimes become a full-time occupation for a business owner. A business loan can be a very important supplement to the life blood of a company.

There are many ways that startup capital can be raised. There is the option of:

Going for a bank (most bank offer small business loans these days)
Exploring and applying to non-banking financial institutions
Using alternative methods such as crowd funding
Approaching angel investors and venture capitalists

For most new businesses the preferred method out of above is to apply for loans with banks and other alternative lending institutions.
 

How to Get a Small Business Loan to Start a Business

As a startup or a business idea in a nascent stage, the best bet to raise funds lies in non-banking financial institutions. It’s recommended to direct one’s energies towards acquiring capital from alternative lenders rather than traditional banks.

Most banks prefer to give loans to small businesses that are already in existence as opposed to someone who is just starting out. Banks prefer to cover risk and it’s for this reason that the documentation and evaluation processes are long drawn and rather stringent. For a new business, sometimes it can be difficult to meet all requirements. This greatly affects the chances of getting the loan approved.

Coming to alternative lenders, they make the process rather hassle-free and easy to get through. Some of the advantages that non-financial banking institutions offer are:

Slightly more flexible requirements and eligibility criteria
Possibility of applying online very quickly
Quick turnaround time on loan approvals
Instant loan disbursement after approvals

Amongst all these the leniency on the eligibility criteria as well as requirements are the most beneficial.

It is helpful to have lenders who will be willing to consider giving out money to owners who may not have a detailed and long credit history. Your top pick should be lenders who focus on your business idea and go-to-market strategy rather than those who focus on cash flow history. Armed with a solid a dynamic business plan, the loan can be applied for still.

Process to get a Small Business Loan to Start a Business

 
There are different types of business loans available and depending upon the requirement of the business, a relevant one can be sought and applied for. Some popular options of business loan include working capital loans, startup loans, cash advance loans etc.

The first step is to determine how much money is needed and what it is needed for. This will go into the business plan that will be evaluated during the loan approval process.

Once the amount has been determined, the next step is to do some research and seek out the available options in terms of lenders in the market. Choosing a lender is also a process that requires time and effort. Things like credibility of the lender (reputation in the market), interest rate being offered, support system on offer, options of how loans can be re-paid, process of loan application etc. need to be factored in before choosing the one(s) which would be applied for.

Once identified, the next step is to get all the required documentation ready and up to the mark. A great business plan which details out information about the business idea, the profitability of the idea, the scaling plan, the vision behind the idea, projections regarding staff and infrastructure as well as the marketing strategy. A clear and transparent business plan goes a long way in putting the odds in the favorable position.

The final step is to apply and go through the process.
 
As mentioned, the turnaround time with non-banking financial institutions is rather quick and if all is okay, the loan should come through within a fortnight or less.

Of course, if you have a business that is already 6 months old or more and has a revenue of INR 12 lakhs or more, you can always apply for a working capital loan at Lendingkart!

What do you think about this article? Please let us know in the comments. If you need to know more about how important it is to choose the right business loan, you can read our article here. We have also written in detail about small business financing options in India and you can read about it here.

Lendingkart offers Attractive Interest Rates for SME Loans

Small and medium enterprises in India are growing at an exponential rate. The Indian Government has launched several schemes for their benefit. Furthermore, the introduction of GST and online portals has increased the ease of doing business in India. You can now quickly gain approvals for new projects or much needed expansions. However, to get things started you will need ready capital for investment, and at Lendingkart Finance, we do just that for you. Lendingkart offers attractive interest rates in the range of 18-27% for short term SME loans.

With Lendingkart’s unsecured business loans, you can get small-ticket short term investment on-the-go. We have made the process completely online so that you can monitor the progress of your application in real-time. Lendingkart loans are approved for businesses having profitability in 2 previous financial years with a minimum annual turnover of Rs. 6,00,000. Other factors such as applicant’s age, income tax returns, and business stability are also used in determining the loan eligibility.

 

Easily Calculate Your EMIs

We offer a business loan EMI calculator which you can use to get an idea of EMI amounts you will be paying. The EMI is calculated based on the Lendingkart interest rate offered to you, the loan amount and tenure. For example, the EMI payable for a one lakh rupee loan, taken for 12-months at 18% interest per annum, will be Rs. 9,168. In similar scenario, if the interest rate is 27% p.a., then the EMI will be Rs. 9,602.

Attractive interest rates for SME loans. Find yours through the EMI Calculator

 

Needless to say, the higher the amount of your loan, the higher the amount of your EMI. The EMI calculator also helps you in budgeting and adjusting your finances to meet your EMI payment schedules.

 

The benefits of taking a business loan from Lendingkart

 

There are several benefits offered by Lendingkart in comparison to banks providing similar loans.

Attractive Interest Rates from Lendingkart

 

Applying for an SME Loan

Terms

Attractive Interest Rate

18% to 27%*

One time Processing Charge

2% of the Loan amount

Loan Duration

Minimum: 1 month, Maximum: 1 year

Loan Amount (min to max.)

Rs. 50,000 to 1 Crore

Part Prepayment Charges

NA

Pre-closure Charges

Nil**

 

*based on your business’s health and credit score

**Pre-closures are only allowed after the first EMI has been paid in full

 

We have a proprietary method of calculating interest rates which evaluates your loan application using advanced analytics. By enabling technical inputs and outputs we have made the process of calculating interest rates faster and more accurate. The attractive interest rates are calculated by factoring in several things listed below and are different for every partner SME.

  1. Loan Amount: The amount that you apply for, pending approval, counts towards deciding the interest rate. Generally, the higher the amount of loan, higher the possibility of a lesser interest rate from Lendingkart.
  2. CIBIL Ranking: If your CIBIL score and history are good, the interest rate we charge will be lower and vice versa.
  3. Balance Sheet: If you are earning good margins, we will take that in consideration while deciding interest rates on your loan.
  4. Age of Business: For long running enterprises, we offer special discounted SME loan rates.

Business Friendly Loan Approval and Pre-closure Charges

 

We do not believe in charging extraneous charges and fees from our customers. That’s why we have one of the friendliest pre-closure policies – there are no pre-closure charges. After paying the first EMI, you can prepay the full loan amount, anytime. Added with the benefit of attractive interest rates, it is a great way to finance any short term business requirement.

Also, we only charge 2% of the loan amount plus service tax as processing fee. It’s a one-time fee which you don’t have to pay if you choose to reapply for the same loan amount upon closing.

Minimum documentation and turnaround time

 

When applying for a business loan with Lendingkart, you have to submit only a handful of documents. And we process every loan application within 3 days of document verification.

Documents required by us are:

  1. Address proof (Aadhar Card, Voter ID, Bank Statement, Proof of registration, etc.)
  2. Identity Proof (Passport, Aadhar Card, Driving Licence, PAN, etc.)
  3. Proof of Business (PAN, GST Registration, Trade License, Registration Certificate issued by RBI or SEBI)
  4. Copy of PAN card and Income Tax Returns for last 24 months
  5. Bank Statement of last 12 months

 

To know more about applying for a business loan with Lendingkart, head over to our website and sign-up for a free account.

Why Dual GST and How it will affect your Business?

Businesses all over the country have felt the impact of the government’s decision to change the country’s goods and services tax code. The new tax, GST, will change the way our country does business, affecting all businesses engaged in sale/supply of goods or supply of services.

What is GST?

The Goods and Services Tax (GST) is a revised and comprehensive form of previously implemented Value Added Tax (VAT). The GST is an indirect tax and replaces many cascading taxes levied by both Centre and State governments. Supply chains, ERP services, product pricing, etc. will all fall under the ambit of GST.

What is Dual GST?

The Union Government and the States were unable to form a consensus for tax revenue sharing. Therefore, the government has introduced a dual GST system – Central GST (CGST) and State GST (SGST).

Example – If a dealer in Rajasthan, selling goods to consumers within the state, makes a sale of INR 20,000 at 18% GST rate. Then the dealer will collect INR 3,600 as total tax. In this case CGST and SGST will be shared by Centre and State equally as INR 1,800 each.

Effective July 1, both CGST and SGST are applicable on the taxable value of goods and services shipments pan India, except in the State of Jammu and Kashmir.

Impact of GST on your pricing

Implementing GST will reduce the impact of numerous indirect taxes which were applicable on your manufacturing and supply chain. This will allow you to decrease the cost of product and services in mid to long term and pass on the benefits to your customers. Although, for various services, the short-term prices may go up as the tax rate has been raised by 4-6%.

Effects of GST on your SME:

The dual structure of GST is meant to be fairly simple and transparent, with only a handful of CGST and SGST rates being implemented. The new tax regime includes both costs and benefits for SMEs:

• Reduction in the number of taxes you were paying earlier. However, Customs Duty and some other levies are still in place for imports and excepted items under GST

• Reduction in your transactional costs due to simplified tax compliance code and online procedure • On the flip side, GST might increase your operating costs if you do not have tax professionals to look after your annual filings. So, hiring an expert may be your only way to have tax compliance

• Compliance issues may also arise due to the mid-year implementation of CGST and SGST

• If you are running a manufacturing SME the tax burden may increase since the excise laws exempted units below 1.5 crores whereas the limit is now 20 lakhs

Who should register for GST?

• If your business is registered under VAT, service tax or excise duty, you can move your registration to GST. Also, firms and companies with a turnover of 20 lakh or more per annum are mandatorily required to have a GST registration. If your business involves inter-state transactions, GST registration is mandatory for you, regardless of the turnover

• Websites and portals where supply of goods and services is managed are also required to register with GST without exception

• An Input Service Distributor, which means a head office that receives billing for all its branches, is also mandatorily required to register for GST

Have you adapted to the new GST regime, and how much impact do you think it has had on your business? Let us know in the comments.

The sequel to this post will deal with how to leverage GST in getting competitive edge for your business.