What Experts are Saying About Taking Startup Business Loans?

Being an entrepreneur is more about creativity than financial pursuits. Successful enterprises are started with an innovative idea that grows to become a viable product or service. Such products or services can either be a means to fulfil the requirements of the day or a means to create an entirely new market. In both cases, creative ideas and continued innovation thrive whereas half-baked schemes are often unsuccessful.

However, it is also true that every great business idea needs funding to make it into reality. Every new entrepreneur faces the problem of business finance when giving shape to his/her first business idea. While self-funding can help sustain the startup for a short time, scaling it up to full potential requires additional funding.

To fund or not to fund? It is one of the crucial questions faced by an entrepreneur. If the business idea is viable then it would need funding for growth and if the initial launch has not drawn the expected response, either it needs strategic tuning or needs to be abandoned altogether. In both cases, the funding is most likely secured through a short-term debt, such as a small business loan, before the business can be pitched to investors for future funding.

In today’s post, we have summarized 3 tips by startup experts that can help you decide when you should apply for a small business loan for your startup business.

Tip 1: When your answer is ‘yes’ to these three questions

Honest determination of the following queries will help you determine the strength of your idea and its feasibility in the existing market conditions. If you can positively answer these three questions then you should definitely go ahead and apply for a startup business loan.

  • Do you have a unique business idea which addresses a genuine customer need or requirement?
  • Can your idea be achieved through current technology and marketed within the next 12 to 18 months?
  • Is your management team capable enough to make the idea into a reality?

If your answer to each and every question posed above is a definite ‘yes’ then perhaps it is time for you to start looking for business loans online.

Tip 2: When you have a runway for at least a couple of years of operation

No business, small or big, is built in a day. An enterprising mind needs to think ahead about the things that are to be achieved in the near term i.e. 2 to 3 years down the road. For that, you need a clear analysis of your finances and operational capacity and add the runway that will be provided by the small business loan to it. If your runway is exhausted before the minimum 2 years required, you need to re-analyze the targets or the finances, whichever suits your needs.

Taking a loan that is too small for actualizing your business plans will leave you stuck in the middle with a risk of losing everything that was planned. Similarly, a loan that is too large may leave you with a debt that your business and personal finance could not service.

Tip 3: You are absolutely sure of the market demand for your product or service

As discussed above, the initial phase of operations lets you know about the shortcomings of your product or services. This allows you to realign the enterprise to better suit the customers’ needs. This phase of trial and error takes some time but eventually helps you in making your product market-worthy.

So, it is recommended that the concern of funding should be raised only after this period is over and the product or service is ready to fill the demand in the market. Raising money too early will have you burning the cash on unnecessary expenses, hence increasing your initial losses, which can sometimes lead to a premature end of an enterprise.

Once you have found the business model that works, you can move ahead with raising funding through business finance.

Lendingkart Small Business Loans for Startups

Once you are done setting up the business, answering the three crucial questions, laying out the roadmap, and finalizing the business model, getting a business loan for startups become easier. Non-banking financial companies like Lendingkart have financial products and services designed for today’s fast business environment. For instance, you can get a business loan online within 3 days of application from Lendingkart Finance.

These unsecured business loans are offered for a period up to 2 years with a principal value of up to ₹ 2 crores. The loan interest rates are determined through proprietary business analytics which makes the whole process transparent and fast. Furthermore, a startup business can repay the loan in easy monthly instalments or repay the loan early through bi-weekly payments. Lendingkart also promises zero prepayment penalty if you decide to settle the debt early through a one-time payment after servicing the first EMI.

To be eligible for a startup business loan from Lendingkart, your enterprise needs to be operational for a minimum period of 6-months. To know more about our startup business loans and check out the complete eligibility criteria, visit us at www.lendingkart.com.

Five Key Challenges Faced by India’s Women Entrepreneurs

Every day, the age-old stereotypes of India’s patriarchal society are being broken by enterprising women artists, business leaders and political personalities. The newfound institutional and social support has enabled aspiring women to come out and challenge men in almost every field. The small and medium enterprise industry is no different and many such businesses, helmed by women entrepreneurs, are leading innovation and giving stiff competition to their industry counterparts.

However, India is still in early days of a social revolution that demands equal status for all genders. A women entrepreneur in India faces many challenges in starting and continuing her journey. In today’s post, we discuss the five key problems faced by business women in India.

Social Acceptance for Working Women

While India has become more open to working women in recent years, in most cases the acceptability still comes with a caveat. A working woman is expected to balance her time between household chores and her professional work in most families. This may not be a key challenge for educated young women in cities starting their own business but definitely pose a challenge for married women living in urban or semi-urban areas who discover their calling later in life.

Marketing and Promoting their Enterprise

Another key challenge faced by women entrepreneurs is marketing and promotion of their startup business or SME. The matter is further complicated by the fact that online marketing and promotion has taken center stage in recent years. Since, IT is a male dominated field, women entrepreneurs often face competitive disadvantage when hiring online promoters and agencies to market their business.

Problems in Resource Procurement

Be it leasing a space for running their business or making a deal for raw material supplies, most women entrepreneurs face heavy disadvantage and distrust when starting on their own. Once again, it’s the prevailing social bias and general misconceptions about work ethics of women that hinder their access to raw materials, labor and machinery. Therefore, in most cases, women entrepreneurs end up paying above the base rates for procuring operational resources and supply chain contracts.

Getting Funding for SMEs

A major challenge faced by women entrepreneurs is securing funding for their small business. Here the issue is two-fold. The traditional banking system is still run by India’s lumbering bureaucratic system which is slow, biased and male dominated. This makes it very hard for women entrepreneurs to secure funding from a bank as the ultimate power for approving a business loan rests with the bank officials. On the other hand, Angel investors and venture capitalists who fund startups and promising SMEs often balk at working with women CEDs and business owners. Even if they do agree to fund a small business run by a woman, they often try to take control of the company by creating proxy power centers in the company.

A Patriarchal Social Order

As a whole this article may seem like a rant about women entrepreneurs not getting their due recognition because of the men. Well, it is the truth of the day. The key challenge faced by women all over the world and especially in patriarchal societies like India is the dominance of men. Women entrepreneurs face a lot of gender-based discrimination and harassment while working their way to success and these are not limited to the points mentioned above. Therefore, the existence of a biased social order is, without doubt, the biggest challenge faced by working women.

Our Vision for Empowering Women Entrepreneurs

At Lendingkart Finance, we believe in equality and adhere to the ethos defined in the constitution of India. Ensuring safe working environment for women and empowering them is a part of our vision and mission. One of the main reasons why women in patriarchal societies lag behind men is due to the lack of financial freedom. Here, at Lendingkart, we try to rectify that with our unbiased financial support system for small businesses which relies on business performance rather than social bias for granting small business loans.

We have an online business loan application process which analyzes your business for performance and financial stability and gives instant loan quotes, regardless of your gender. To simplify matters further, we have kept the documentation requirements to bare minimum. Once again, document submission is also done online and our system allows you to track your loan application in real-time as we verify the information provided by you.

If you are a woman entrepreneur looking for quick business finance to meet your working capital requirements or business expansion, Lendingkart can offer you a small business loan within 3-days of application. Furthermore, our unsecured business loans come with lower interest rates than many of the traditional banks and lending institutions out there. We also offer flexible repayment options such as monthly or bi-weekly EMIs that allow you to repay your loans easily.

Lastly, a relationship with Lendingkart Finance also gives you the opportunity to connect and network with like-minded SMEs and startups to grow your small business.

Concluding Thoughts

The business scene is still a tough place for women in India, but despite its hardships, enterprising women continue to find new ways to beat the odds placed against them. For the most part it is their own will power and vision that makes it possible for them to overcome the social and professional challenges; and in a small part it is the help from a younger, more open and pragmatic social and business order.

Here’s How You Can Raise Funds for Your Startup

All startup businesses begin with exciting new ideas and high hopes. However, it is also an unfortunate fact that most startups run into unforeseen financial and operational difficulties within the first year of their operations.

Business researchers often point to a number of reasons that are responsible for the failure of a promising new venture. Yet, the fact also remains that most of these difficulties arise due to inadequate capital.

Capital is the basic requirement for running any venture and no business can be expected to thrive if it does not have proper financing. That is the reason why the concept of investor funding is so strongly embedded in the startup scene. But, raising funds is not only a tedious exercise, it also determines the future of a startup venture. For instance, you may lose the control of your business by giving up a large stake in return for capital funding.

There are a number of ways you can raise funds for a startup business, such as bootstrapping or self-funding, crowdfunding, Angel investment, venture capital, working capital loans, and government programs that help MSMEs. Every one of these methods has its own pros and cons. Let’s have a look.

Source:

Pros:

Cons:

Self-funding:

Using funds from personal savings or borrowings from family and friends or both.

-Easily accessible funds

-No bureaucratic hassles

-Flexible interest rates

– Not feasible for large scale business operations or expansions
Crowdfunding:

Getting funds from crowdfunding platforms by making a pitch and getting capital from interested crowd funders.

–       Helps in marketing as well as financing by creating a public interest

–       Allows you to retain control of your business

–       May help attract future investment from venture capitalists

–       Competition is heavy due to the public nature of the platform

–       So, is the probability of your idea getting rejected due to too many homogeneous ideas

Angel Investment:

Basically, getting funds from individuals with huge capital worth, willing to invest in new business ideas.

–       An Angel investor can also provide valuable business mentorship along with the capital investment

–       Angel investors are less risk averse

–       The capital provided by Angel investors is often less in comparison to venture capitalists or other business funding methods
Venture Capital:

Venture capitalists are professionals who tend to invest in solid business ideas. However, they rarely seek equity and pull out when a business is acquired or upon IPO.

–       Venture capitalists bring a huge amount of mentorship and business acumen to the table

–       They help you design exit-strategies that allow huge profit margins

–       Venture capitalists tend to take away the control of your business in order to recover their investment quickly

–       Venture capitalists are mostly interested in large companies which have a proven business model

Working Capital Loan:

A loan from a microfinance company or NBFC that especially caters to the needs of small business owners.

–       Loans are unsecured so there is no risk of collateral loss as is with a bank loan

–       A quick business loan can fast track your income generation

–       Helps small businesses gather their bearings before seeking higher investments

–       No legalities and technicalities in comparison to traditional bank loans

–       None that we can think of
Government Programs:

Getting funds from the government subject to institutional scrutiny and meeting the policy parameters.

–       Great way to source funds at low interest rates along with subsidies and other incentives –       Very slow, long, and often tedious process that may take months or even years to get an approval

So, now that you know about the various ways of raising capital for your startup business, the obvious question that needs asking is – which one is the best?

Well, if you are looking for a quick and hassle-free funding, it means you have already tapped in bootstrapping sources. So, the next best thing here will be getting a working capital loan from an NBFC.

Faster Business Loans without Security

Non-Banking Financial Companies offer loans for business without requiring a collateral. NBFCs are also business sensitive and hence provide quick business loan approvals and disbursements in comparison to traditional banks. For example, a bank may take up to 15 days to process your business loan application whereas you can get a business loan approval within 72 hours by applying with an NBFC like Lendingkart Finance.

Flexible EMIs, Interest Rates and Prepayment Options

Working capital loans for business come with the added benefits like a flexible EMI schedule, lower interest rates and zero prepayment charges. If you are a budding entrepreneur, these benefits can be a godsend for your business. For instance, the ability to customize your EMIs allows you to plan your repayment in tandem with your invoicing cycle. Lower interest rates mean you are not losing precious capital in interest payments. Finally, if at any stage your business starts generating expected profits and you wish to repay your business loan in full, there are no prepayment charges, fees or penalties.

Conclusion

Raising funds for business establishment and growth is always tricky. There are a lot of checkboxes that you need to tick before getting the capital you need. Furthermore, some of the most popular startup funding measures are also the most crowded ones as other entrepreneurs are also having the same funding ideas. Whereas getting funds by giving away equity has its own pitfalls in the long-run and can leave you without any control whatsoever over your business. Alternatively, you can get a bank loan for funding your business but that process is also marred by slow processing, bureaucratic red-tape and the huge risk of collateral loss.

So, amidst such tedious and discouraging scenarios, getting a working capital loan or a business loan from an NBFC like Lendingkart is the most plausible alternative for funding your startup. Add to that the many benefits of NBFC business loans, and the fact that you do not have to give away control over your business for getting working capital funds, and you have a winner on your hands.

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:

  1. Going for a bank (most bank offer small business loans these days)
  2. Exploring and applying to non-banking financial institutions
  3. Using alternative methods such as crowd funding
  4. 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.

Eligibility for Startup Business Loan:

While a business loan can be applied for with a government or private bank or with non-banking financial companies, there are some basic eligibility requirements which need to be met. These requirements vary from institution to institution. For example, government loan schemes often have stringent requirements and do no offer the best business loans for new businesses. Since these schemes are typically refinanced by public and private sector banks, the process is slow and full of hassles. On the other hand, NBFCs have startup loan schemes which offer instant business loans with personalized terms. To get a startup business loan from an NBFC like Lendingkart, you need to meet the following eligibility requirements.

  • An established business that has been running for more than 6 months.
  • A minimum turnover of ₹ 90,000 or more in the past 3 months.
  • The type of business should not be categorized under the blacklisted/excluded list for SBA finance.
  • The physical location of the enterprise should not be in the negative location list.
  • The business should not be a trust, NGO or charitable institution.

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.

Startup Business Loan Interest Rate

Interest rates are one of the major concerns for a small business owner applying for a business loan. Higher interest rates can raise Both the total repayable amount and the money you pay in each EMI. Since most small businesses are operating at very thin to non-existent margins, high interest rates on business loans can be a major deterring factor for them. In extreme cases, not having access to institutional finance can ultimately cause a startup to cease operations.

Now it is an established fact that startup business loans without collateral have higher interest rates due to the increased risk of default for a lender. However, not every startup owner has significant personal or business assets to collateralize. In such cases, FinTech lenders like Lendingkart Finance can help a startup to lower interest rates on a business loan. Since, FinTech firms operate online, they are able to save money that would go in man-hours. These savings are passed onto the customers in the form of lower interest rates. With Lendingkart, you can get interest rates which are customized for your business’s financial profile.

Document & Requirements for Startup Business Loan

The documents required for getting a loan for startup business also vary from lender to lender. Where a traditional bank or government business loan scheme relies heavily on documentation, a FinTech lender relies on the relevant business and KYC documents instead of asking for unnecessary paperwork. Here again, citing the example of the NBFC, Lendingkart Finance, we are sharing a basic list of documents required for startup loans.

  • Bank statement for the last 6 to 12 months.
  • Proof of business registration such as business registration certificate, GST filing, Gumastadhara, trade license, drug license, TIN or VAT registration.
  • Copy of proprietor’s PAN Card.
  • Copy of proprietor’s Aadhar Card.
  • Copy of the Partnership Deed (if applicable).
  • Copy of the company PAN Card.

All these documents are required in the digital format as Lendingkart’s business loan application process in online ‘only’.

Coming to the benefits of applying for business loans with 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:

  1. Slightly more flexible requirements and eligibility criteria
  2. Possibility of applying online very quickly
  3. Quick turnaround time on loan approvals
  4. 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! They have a minimum turnaround time of 3 days for eligible businesses.

How to use a Startup Business Loan

The benefits of getting a startup business loans are numerous. You can utilize the money for purposes like business expansion, restocking inventory, working capital management etc.

Startup business loans from NBFCs like Lendingkart give you enough money to invest in multiple things in one go. They have a ticket value which can go up to ₹ 2 crore, helping you launch projects at a faster pace and get into the profit zone.

However, it is also important to remember that you should use the loan funds expressly for the purpose defined in your planning. Spending the loan money unwisely can result into a debt trap for your fledgling business.

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.