9 Tips to Choose the Right Business Loan
Running a successful business needs more than just management strategies and marketing mantras. It also needs an influx of significant sums of money from time to time. These funds are usually required for a wide array of purposes, including:
- Working capital requirement
- Expansion of business functions
- Diversification of business
- Buying new equipment
- Refurbishing parts of the business
It isn’t always that a business may have access to funds required for these objectives, which is why a vast majority of business owners turn towards a Business Loan. As is the case with any other financial aid, even choosing the right Business Loans needs specific diligence.
To ensure that you opt for a loan that best suits your needs and meets your preferences, make sure you follow these tips.
1. Estimated Amount
Given that you’re on the lookout for a loan, it is evident that you need a substantial amount of money. And if your business enjoys a good credit history, procuring a loan would be rather easy. However, borrowing more money than you need isn’t going to do any good to the business. In fact, it will make you pay higher EMIs (Equated Monthly Instalments) along with a heftier interest. Hence, before you start your search for a lender, zero in on an amount that you would need. While doing so, make sure you add an extra 10%, to meet contingencies, if any.
2. Type of Loan
While all Business Loans are offered with the motive of helping business owner propagate their enterprise in one way or another, they differ in their categories, which include:
- Secured loans
- Unsecured loans
- Loans from banks
- Loans from online lenders
- Credit Card
- Peer to Peer Lending
The type of loan you must choose largely depends on the sum of money that you need and the tenure of the same. For instance, if you want an amount of 80,000 for a month’s time, you can use your Credit Card for the same. If however, you want the money for a six months’ time, you should ideally opt for peer to peer lending or overdraft. On the other hand, if you require a loan amounting 1 Lakh or above, you should opt for a secured or unsecured credit, depending on the interest rates you are willing to pay.
When taking a loan, it is a good idea to plan the same, as most lenders offer better deals in such cases. If however, you need to procure the loan at the earliest possible, expect to get it for a higher interest rate.
Another aspect to contemplate here is that banks and non-banking financial institutions usually take more time to disburse the loan, as compared to us at MyMoneyMantra. We are able to processthe same within a few days’ time.
4. Repayment Period
In most cases, it is advisable to opt for a loan with a more extended repayment period. This will not only ensure that you have to pay smaller EMIs, but also that the rate of interest is on the lower end. However, if you need the money only for a short period, opt for a loan that allows a small tenure. It will help you save a significant quantum of money that you would otherwise need to pay as interest.
5. Appropriate Lender
Instead of simply turning to your bank for a loan, it would be in your interest to search other lenders and analyze the terms and conditions of the loans offered by them. Given that a large number of lenders are currently offering loans based on business type, you will find better options.
6. Credit History
To get a loan at optimal interest rates, it is essential that your business boasts of good credit history. Hence, before you Apply for an unsecured Business Loan, review your account and check whether it needs some rectifications. If so, dedicate some time to the same, and use some proven strategies to boost your credit score. Once you do so, finding a loan at a favourable rate would become far more manageable.
For lenders to assess your loan requirements and disburse the amount at the earliest possible, it is essential you have all your documents in place. Hence, it is advisable to collate your financial statements, company accounts, evidence of other business finance ahead of time.
8. Forward Plan
Make sure to approach a lender with a detailed plan of what you intend to do with the loan amount, Show them the expenses, and give them a fair idea of the estimated revenues. This will help establish their faith in your ability to repay the loan, thus ensuring that your application gets a swift approval.
In the present day times of unparalleled dynamism, you can be sure of getting more than just a few attractive offers for Business Loans. And while some options may attract your attention due to low-interest rates and other beneficial conditions, we strongly advise you to go through the fine prints and weigh each alternative carefully. Here, make sure that you take into account various aspects such as additional charges pertaining prepayment, foreclosure and legal fees, as well as probable penalties.
Finding a Business Loan is easy, but spotting the right investment may require some efforts on your part. However, the benefits you enjoy from the right credit, will easily outdo the time and work you put in. Hence, make sure you take a note of all the tips as mentioned above, and zero in on a loan offer that is beneficial for your business in every possible respect.
Also Read: The Dawn of Instant Business Loans
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.