When you are looking for a loan to grow your business, then merely choosing a lender and applying for a loan is not enough. There are various other parameters and information that one must have to make the right decision about the business loan. In this article, we will help you choose the best business loan for you while focussing on the important aspects of a business loan.
What is a Business loan?
A loan intended for business purposes is known as a business loan. Similar to other loans, it involves the creation of a debt, which has to be repaid in a particular time period with added interest.
Eligibility criteria for a business loan
If you are looking for a business loan application, then you are required to fulfill the eligibility criteria are listed by the lender. While the eligibility criteria may vary for different lenders, some common points are mentioned below. The following personnel can apply for the loan:
1. Self-employed individuals, private limited companies, proprietors, and partnership firms who are working in manufacturing, trading, or services.
2. Individuals who have a total experience of 5 years and have been engaged in their current business for at least three years.
3. Individuals applying must be at least 22 years of age while applying for the loan and should be less than 65 years of age at the time of maturity
4. Enterprises that have a minimum turnover of `10 Lakhs.
5. Enterprises that are making profits for the past two years.
6. Enterprises with a Minimal Annual Income (ITR) of `2 Lakhs per year.
How to choose a Business loan?
Before you apply for a business loan, these are some points which you must keep in mind:
1. Business loan requirement: Based on your business plan, and what you wish to do in the future, make a list of the requirements and accordingly decide on the business loan amount. This is important because excess loan amounts will lead to unnecessary expenses later. This will also cause financial strain on your company. Also, an amount lower than your business loan requirement will be detrimental to your enterprise.
2. Interest rate: Make sure to check the interest rate that is provided by various lenders for your business loan. The interest rate ranges between 17-21%, but the final lending rate for you will depend on various factors like income, credit score, age, business type, and many more. Once you know the interest rate you can also calculate the EMI that you will be required to pay, knowing the exact financial debt that you will be in.
3. Flexibility in Payment: Many lenders these days, offer flexible repayment options for a business loan. This gives you the freedom to focus on business development rather than payment due dates. This helps you choose a customized repayment schedule offering you the comfort of repayment.
4. Processing Time: One of the important factors is processing time. Mostly the banks have a long process for approval and disbursal of funds. However, with the digital age, loan application, approval, and disbursal have become quick. So if you are looking for an instant business loan, choose your lender wisely.
5. Collateral: Based on your business performance and revenues, some of the lenders also offer business loans without any collateral. However, the loan amount, in this case, is capped. So if you require a loan of less than Rs 50 lakh you can also look for no collateral business loans.
A business loan is aimed to invest in the growth of the company, therefore selecting the right financial product is critical. While there are a variety of online tools and digital lenders in the market, make an informed decision as it will impact your business. With the right business loan lender, you will be able to grow your business exponentially.