Many business owners start their businesses with the help of a loan. If you have a business idea and want to start a company but lack sufficient funds, you can get a business loan India from various banks or finance agencies. Choose the right type of loan by checking its repayment period, interest rate, and other features.
However, you can also get a business loan if you need funds to expand your business into new markets, open a new location, improve your product or service, or want to have extra capital for future use. Here you can learn essential things about the business and the right way to get a business loan without difficulty.
- Learn about the different types of loans
You can become eligible for various types of loans for small businesses. Some standard business loans include working capital, MSME & SME loan, Invoice financing, start-up, and machinery loan. Businesses usually choose a working capital loan to finance their company’s everyday operations. You can get a working capital loan to settle expenses like rent, payroll, operational costs, or other expenses during off-seasons.
You can choose MSME and SME loans if you are a micro, small, or medium-sized enterprise. You can also take invoice financing if your business holds a large gap between making a sale and receiving its payment. Machinery loans will work if you want to invest in new equipment or machinery. Start-up business loans are specially for new business ventures. Check your requirement with each type of business loan and choose the one suitable for your business.
- Prepare essential documents
Once you determine the need for funds for your business, estimate the amount you will need for it. Plan to get 80% of the estimated loan amount, so you can easily repay it. You should also prepare all the essential documentation before applying for a business loan India. Most loan rejections happen because borrowers submit incorrect or outdated documents for verification.
If you have any lender in mind, check what documents are required to get a business loan from them. Generally, you will need these documents: a correctly filled application form, a PAN card, an income tax return, identity proof, address proof, a detailed business plan, a CIBIL score, and a bank statement.
Also Read: What is a working capital loan?
- Estimate your EMI
After estimating the loan amount and receiving all necessary information regarding the loan for small businesses from your lender, you can use the business loan calculator to estimate the EMI, which will help you see if you can afford to repay the loan within the stipulated period. You can go to your lender’s website and type in the loan amount, interest rate, and length of time you want. The calculator will display the number of EMIs as well as the total amount you must pay. If you cannot repay the EMI, you can increase your tenure or ask the lender to reduce the interest rate.
- Ensure a good credit score
Creditworthiness is essential when applying for a business loan India. For loan approval, you should have a credit score of at least 750. Some lenders also check the creditworthiness of your business before determining your loan eligibility. You can improve your credit score by paying your credit card bills or other due payments with banks.
- Consider speedy disbursal
After you submit your loan approval, the lender will verify and approve it within 3 to 4 days. Once the lender approves your loan for small business, they will disburse money into your bank account. However, sometimes borrowers submit false documents or information in loan applications, which can slow down the disbursal process.
To ensure speedy disbursal, you must apply for a loan carefully. Keep all your documents and financial records updated. If you have previous debts, pay them before applying for another loan. You should follow all the business loan application steps until the end. You can contact your lender to check the status of your business loan application.
Once you understand how to get a loan for a small business, you need to find the right finance agency that offers a range of benefits, like low-interest rates, flexible repayment periods, and more financial support. It would help if you also estimated how much money you need, as lending more or less money than you need can be problematic later.