As the Indian economy recovers and grows in 2023, more companies are expanding their horizons and rebuilding their inventories. The demand for Business Loans has started picking up with borrower-friendly eligibility conditions and loan plans. As more entrepreneurs plan to apply for SME loans, loan providers become more ardent in guiding their clients through loan processing.
Several technical and financial aspects make applying for a Business Loan daunting for aspiring borrowers. However, asking questions and clearing doubts with the lending institution’s representative can lighten the load significantly. Those who are unsure about what to ask before applying for a loan should keep these five questions in mind:
- How much loan amount can I get for my business?
Since different loan providers have various amounts and conditions for Business Loans, it’s crucial to know how much financing is available. Small business owners can apply for MSME loan to cover their business-related expenses. Whether they plan to expand their business, build working capital, or purchase machinery and equipment, an SME loan allows them to borrow up to ₹ 50 Lakh. Use the Business Loan calculator to know your EMIs before applying, as it calculates the EMIs based on the loan amount, interest rate and repayment tenure.
- What are the Business Loan interest rate and total loan costs?
Loan providers charge a nominal fee for loan administration and an interest rate on the borrowed amount. Check these charges from your loan provider and make a well-informed borrowing decision. Additional charges on Business Loans include origination fees, legal fees, processing charges, documentation charges, and other upfront costs.
The business loan interest rate can help an individual determine loan affordability and calculate the loan cost using an EMI calculator. Calculating the loan cost will help plan the monthly repayments properly and keep the finances under check.
- What credit score do I need to obtain a Business Loan?
The credit score is the most crucial parameter determining an applicant’s loan eligibility. It is a 3-digit score that indicates an applicant’s creditworthiness and capacity to pay the EMIs on time. Most lending institutions expect a minimum credit score of 700 or above to process Business Loan applications. The higher the score, the better it is for loan applicants, which helps get easier approvals at lower interest rates.
So, checking your credit score is essential before applying for a loan. Those with a low credit rating must take immediate steps to improve it. Paying bills on time, retaining old accounts, clearing outstanding balances, and diversifying the credit mix are efficient tips to improve the credit score quickly. Remember, checking the credit score is a soft enquiry and does not affect the credit report.
- What do I need to prepare for a loan application?
According to the loan company’s eligibility conditions and documentation requirements, applicants must provide their balance sheet, bank statements, profit and loss accounts, and other financial documents to prove their repayment capacity. Most NBFCs have minimum and maximum age requirements to ensure the applicant’s earning power. Moreover, the business should have been running successfully for the last few years with a minimum annual turnover specified by the loan provider.
If the applicant is eligible and the documents are ready, they can fill out an online application form and leave their contact details on the NBFC’s website. The customer representatives will get in touch within a few working hours and discuss other requirements and formalities. If everything goes fine, including in-person verification, they instantly approve and disburse the loan amount.
- Can I apply for an SME loan online?
Yes, most technologically-advanced NBFCs have websites where aspiring borrowers can directly fill out an online application form to apply for a loan. They can also complete the documentation through the NBFC’s website. The best thing is that they do not need to visit the loan company’s branch office to apply for a loan. They can complete the formalities online and get the required funding at the best Business Loan interest rate after a brief in-person verification.
Need funding for business growth? Online NBFCs are re-imagining how entrepreneurs get the funding required to grow. However, ask these questions before applying for a Business Loan to match your funding requirement and avoid complications later.
About the Author
Amaira Sharma is finance expert and former business growth strategist who has more than 8+ years experience in the industry, now she helps others to get better financial stability and standards. She loves to write useful tips on personal finance and businesses.