Business Loans: A Beginner’s Guide
Do you need finance to expand your small-scale business or purchase an existing medium-scale enterprise? Here’s our handy beginner’s guide to small business financing.
Mukul Thakkar, 35, was looking to change the way people in Ahmedabad eat by opening a certified organic café in the city and creating what he called a “real food revolution”. Since he already had his decade-old catering business that served food made strictly with locally-sourced vegetables, he was well-versed in this farm-to-table trend of organic foods. However, he was falling short of Rs.20 lakh in terms of capital, and therefore wanted to go in for a good small Business Loan to fund his new café. But he was a novice when it came to short-term small business financing options. So he began doing some research, and few days later, managed to narrow down the guidelines for small Business Loans into his own beginner’s guide to small business financing.
Read on for the pointers in his beginner’s guide to Business Loans:
When Should You Apply for a Small Business Loan?
Need finance to fund the expansion plans of your business? Opt for short-term small business financing options. Loans for small business also prove vital when you need to pay for one-off business expenses or manage the demands of employees and clients. What’s the biggest advantage of applying for a small Business Loan? Your company can use the loan amount to increase its working capital. Are you looking to expand your business but already have enough money to make it grow? Taking out a small Business Loan may allow you to maintain your operating cash flow, and thereby help you to cover any unexpected expenses. You can then use the new income gained from expanding your business to make payments on the loan with ease.
Who Can Opt for Small Business Finance?
Any firm can apply for a small Business Loan, no matter whether it is a limited or private limited company, or a partnership or proprietorship business. There are Business Loans for self-employed individuals as well as salaried doctors, among others. However, at the same time, you have to be familiar with the requirements of the lender you’re applying to. Knowing whether you meet the eligibility criteria before you apply for a small Business Loan will save you time and frustration.
How Much Do You Have to Pay?
Small Business Loan rates and fees vary from lender to lender. The processing fees are often nominal. Business Loan Interest Rates range from 16% to 35%, depending on factors including your loan tenure, the financial situation of your business and your credentials.
Do You Have What It Takes to Qualify?
Before you apply for a small Business Loan, it’s smart to have a clear understanding of what banks and other lenders require in order to consider your application for a small Business Loan. To be considered for short-term small business financing, you typically need an excellent business credit score and good personal credit. More than likely, you’ll need to have been in business for at least 3-5 years prior to applying, and have the documentation to prove your financial stability. Lenders will also ask you for a detailed business project report. A road map and plan to repay the loan that you have can speak volumes in the Business Loan application process. Many lenders also require you to either have a guarantor or pledge collateral, such as property, which they can foreclose on if you fail to repay your small Business Loan.
Which Documents Do You Need?
When you apply for a small Business Loan, you are required to fill out forms and documents. It is a good idea to be prepared in advance for your Business Loan application process by gathering some basic information that all lenders will ask for, regardless of the type of Business Loan. Depending on the lender for short-term small business financing options, you’ll need to submit a combination of the following documents with your small Business Loan application:
- Income details like balance sheet, tax returns of last two years, bank statements
- Business proof: Certificate of practice
- Proof of ownership of any property used for business purposes
- Identity proof, address proof, and photographs
How to Speed Up Your Business Loan Application Process?
Is there any way you can prepare to get your small Business Loan quickly? If you want to make the process faster, there are the following things you can do before you apply for a small Business Loan:
- Ensure that your financial records are updated
- Be aware of the value of the assets you want to pledge as collateral
- Keep your bank statements handy
What Makes the Bajaj Finserv Small Business Loan Different?
Bajaj Finserv gives you a loan for business without a guarantor or collateral, thereby making the Business Loan application process easier for you. You can apply for a small Business Loan up to Rs.30 lakh through the Bajaj Finserv website and get the approval online as well. Post disbursement, you can also keep track of your Bajaj Finserv small Business Loan by checking the payment schedule, repayment history, etc.