5 Startup Business Loan Basics Every Business Owner Must Know
Starting your own business is one of the best feelings in the world. After all, you are your own boss. However, it also means that you have to shoulder most of the responsibility and arranging for finance as and when required.
After a certain period of time, you will require funds from an external source due to reasons such as delayed payments, purchase of new assets or acquiring materials in bulk. Whatever be the reason, the matter of the fact is that you need money and you need it as soon as possible. There are some options for raising funds from venture capitalists, but that would mean giving up a portion of your ownership in the venture. Well, there is no need to resort to such options as you can apply for a Business Loan to finance your funding requirements.
What are Business Loans?
Business Loans are a financial product which is offered by most lenders in India. As the name suggests, Business Loans are meant to be used for business requirements only. Depending on the nature of the requirement and the amount required, these loans could be secured as well as unsecured.
Business Loans usually come with repayment tenure of up to 60 months. Startup Business Loans can be used for any business-related expenditure such as the purchase of machinery, upgradation of infrastructure, payment of expenses or any other business-related expense.
With the rapid influx of technology in the financing sector, it has become really convenient for business owners to Apply for a Business Loan Online. You can visit the site of the particular lender you prefer or can compare various Business Loan offerings on online loan marketplaces like MyMoneyMantra. Whatever mode you choose to apply, you need to make sure that you have conducted thorough research, have compared different offers and are fully satisfied with your decision.
Business Loan Basics That You Must be Aware of
As a start-up owner, it is possible that you are not aware of the essential basics related to Business Loans and are therefore unable to use them to your advantage. Here are five crucial Business Loans basics that you must be aware of:
1. Always consider annual percentage rate
Whenever you want to apply for Startup Business Loans in India, you must consider the annual percentage rate (APR). APR is different from interest rates, as it consists of all the other charges and expenses that you need to pay against the loan for a year. This will give you a clear estimate of your total cash outflows for loan repayments, and you can plan your finances better. It is possible that one lender offers you a lower interest rate, but its APR comes out higher than the second one, in such case you must select the second option.
2. You need collateral or a guarantor
As your business venture is a start-up, the chances of you having collateral to be pledged with the lender are minimal. Most lenders want a good credit history or security while lending to a start-up, for the sake of the safety of their money. But you can always get a guarantor or co-applicant on board to enhance the chances of your application being approved.
3. A good credit score is a must
Having a good credit score (above 650) has become the most critical parameter for lenders to assess your creditworthiness. If you are considering applying for a Business Loan, you must check your credit score. If it is above the specified level, then there is nothing to worry. But if it is below the specified level, the chances of your application being approved are significantly reduced. It is thus better that you start working on improving your credit score before applying for the loan.
4. Options other than banks are also available
When you consider applying for a Business Loan, you must remember that banks are not the only option you have. Many NBFCs (Non-Banking Financial Companies) also offer Business Loans at attractive rates of interest and are more flexible in terms of eligibility criterion. So before taking a final decision, make sure that you research the offering from NBFCs as well.
5. Need a business plan
When you are applying for business financing, you need to have a comprehensive business plan. It should cover all the aspects regarding your requirement for the money as well as the intended repayment schedule. You should take help from professionals while preparing a business plan so that you are able to impress the lenders with your seriousness of the matter. You should also provide all relevant financial and accounting documents in support of the business plan.
Business Loans offer you an excellent opportunity to avail additional funding to take care of your business expenses in an efficient manner. But always do your research thoroughly, before making a final decision.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 18001034004 to know more about our products and offers.