A business loan is one of the best things that can happen to any business if intelligently spent. It helps the business tide over immediate or long term financial challenges. Businesses are always on the lookout to apply for business loans at competitive interest rates. With the help of the business loan, they can expand their business, stabilise the operational costs, manage inventory and do a whole lot of other activities. A business loan has a force multiplier effect on the business. By investing in the business, the business owner/partners can create newer avenues to earn more. However, it is important for the applicant to maintain due diligence as well as do thorough research before applying for a business loan or an MSME loan.
Here is how to choose the best business loan in India.
What is your requirement?
There are many types of business loans in India. Banks and financial institutions have a wide range of financial products through which they attract customers. It is up to the applicant to decide which loan to avail of. The usual business loans that are available in India are:
- Working capital loan
This is a loan designed specifically to assist the business shore up its working capital with the help of working capital loan. Working capital is required to help the owners operate the business. Every business has daily expenses and any shortfall in that will lead to the business slowing down or even closing. To overcome this short term challenge, banking institutions have constituted the working capital business loan.
- Machinery Loan
Businesses involved in the manufacturing industry or any other industry which involves machinery will have to bear the cost of looking after their plants. This entails a lot of money since machinery undergoes intense wear and tear and needs constant maintenance. There will be times when a few have to be replaced with superior and state of the art tools to keep the wheels of the business rolling. The applicant would then have to go in for a machinery loan.
- Capital Loan
This is usually a long term business loan provided by banks and financial institutions to assist businesses to shore their capitals. Capital expenditure involves the expansion of the business and that is the dream of every business owner. Capital loans are usually provided when the business may not have enough cash reserve to build infrastructure. These loans have a repayment period of around 5 years or more though it varies from lender to lender.
- Capability to sustain the Business loan
Once the applicant has decided the type of loan to be availed, revenue sources have to be evaluated. The main criteria for any business loan are the credit score and the ability of the applicant to pay back. If the revenue channels are unstable then it would be risky to go in for a loan.
What to look for in a business loan?
- Monthly Interest Rate
After the above criteria are fulfilled, look for the best business loan interest rate being provided by the financial institutions. It is pertinent to remember that a business loan monthly interest is a financial liability that is added to the other expenses. Business loans in India are provided by various lending agencies that have attractive interest rates. It will require research to go for the best one.
- Added Benefits
Before you apply for a business loan, it is beneficial to look for the added features which the lender provides. These features are generally provided to attract more applicants. Features like overdraft facilities, free insurance add-ons et all add value to the loan. For MSME loan apply to the various government schemes which are there to support such businesses. Competition amongst lending agencies are high and hence a little bit of diligence is needed before applying for a business loan.
- Flexibility
It is pertinent that lending agencies show flexibility in the repayment process. There might be times when due to external circumstances businesses get hit and the ability to repay may diminish. In such cases, it is to be seen which lending agency shows greater flexibility on repayment clauses.
Conclusion
A business loan is imperative for every business unit. Applying for a business loan in India is no more a hassle. However, one has to be careful before applying for one since a business loan if used unwisely may lead to greater financial troubles.
