Business Loan Eligibility: How Much Can You Afford?
Taking a business loan is a big decision. You might have questions like would your estimated costs match real turnover? You might also be unsure about the impact of market conditions on your business. In such times, it is important to know how much you can afford to borrow. Business loan calculators have made this easier.
Here is how to work out an ideal business loan:
Business Loan Eligibility
First, find out if you are eligible for a loan. Each lender has a specific set of eligibility criteria. For instance, you need to be in the business for three years to get a business loan from Bajaj Finserv. You may need to submit a proof in the form of a certificate of practice. Also, most lenders require KYC documents, proof of income, and proof of address. You have to furnish your bank statements too.
What Helps Your Cause?
- Well-maintained records of your business. Also, keep the financial statements updated and ready.
- A good credit history of your business. Clearing all previous debts works as added benefit.
- A clear, well-researched business plan. You need to establish that your business is feasible. Prepare an outline of how can you make more money with the loan. This is to underscore your repayment ability to the lender.
- A collateral, if the lender requires this. However, lenders like Bajaj Finserv offer collateral-free loans.
- Knowing how much you need. Distinguishing between your needs and wants would help you get a clear idea of the loan amount.
EMI Calculator For Business Loan
Once you know you are eligible, calculate the Equated Monthly Instalment (EMI). Most lenders have an online business loan EMI calculator. For instance, try out the Bajaj Finserv Direct calculator. You need to type in the loan amount, tenor, and rate of interest. The calculator will give you the EMI amount for each scenario. Suppose you need a loan amount of Rs.15 lakh. For a 36-month loan, at 14% interest, your EMI may be Rs.51,266. What if you decide to pay it off in two years? Then, your EMI may increase to Rs.72,019.
What Do You Need to Consider?
- The Loan Tenor: You need to decide whether you want a short-term loan or a long-term one. Assess your repayment ability.
- Rate of Interest: The rate of interest would depend on your business credit history. Other eligibility factors also impact your business loan rate of interest.
- Processing Fee: Your loan processing fee is a charge levied for processing and managing your loan. Ensure that you factor in your processing fee while applying for the business loan.
Your Repayment Strategy for a Business Loan
Before you take the loan, think about how you will repay it. Think about the worst-case scenario. A well-worked-out repayment strategy saves you from trouble. See if you can create a repayment corpus. Think what assets you can divert for loan servicing in dire straits. This would then help you calculate how much you can actually borrow.