If your dream is to own a successful business, or even if you want to make your ongoing business successful, raising funds for your business is as important as figuring out to start a profitable business.
There are various reasons why small business needs funding, some of the reasons can be- need to buy new machinery, pay wages to the staff, purchase land to set up a factory or to buy an office space, it can also be to expand the existing business or to bring down the existing debt.
However, in the initial stretch you need more funds when you are building up sales, you’ll need money to maintain the cash flow and to cover salaries.
So from where can you get this fund? There is a large marketplace for potential small business loans. In India, small business plays a significant role and contributes to a great extent in the GDP of the country. Presently 95% of the industrial units in the country consist of mainly small and medium businesses. Since the number is more, the demand for small business loans is also increasing, and hence finance companies are making it easier to apply and get instant funding for small businesses.
Here are a few tips which will help you to pick the right business loan
Deciding the Type of Loan
In India there are different types of small business loans available- these loans include:
- Working capital loan
- Term Loans
- A business line of credit
- Machinery Loan
- Small business loans
So, in terms to avail the benefits, you first need to decide which one you have to apply for. If you require to buy new tools or machines you can go with a machinery loan, and when you need to pay-out wages or wish to expand your current business you can go with a working capital loan and so on accordingly. Knowing your options always works the best. When you know about the options you can research them one by one and can opt for the best-suited one at last.
Finding the Right Business Loan Lender
When you plan to apply for a small business, you will come across many lenders lending the money with a number of benefits.
Most lenders can approve and disburse loans quickly, but some take time to deliver their services. But, if you really want the best option for your business, you can’t trust any of the lenders easily. Finding the right option needs some time. You need to research a number of financing companies. Go through their website, the customer reviews on their portal as well as on other portals.
From NBFCs to finance companies, and reputed banks you need to consider all these while researching. Compare them on the basis of interest rates, amount offered, and the tenure to payback. Once you decide the lender, you can go ahead to get the loan.
Gathering Documents
When you apply for a business loan, the lender will likely ask about your business’s cash flow to be sure about the repayment. Well, this is your responsibility to provide the correct details to avoid rejection in the near future. Having a full-proof business plan along with the stats showing the potential growth and profit can help you to get approved for a business loan to a great extent. Another important thing here is to know the eligibility criteria & documents required by the lender. Try to apply with those lenders who have a minimum eligibility criterion along with minimum documentation. This is suggested because gathering all the required documents may be tough at that point of time.
Some of the documents required by a small business loan are-
- Previous years’ business details
- Presenting last year’s ITR
- Documents showing business premises from the governing bodies.
- Proof of identity – PAN card, business, and house address proof.
- Income proof- Bank statement for nine months
- Commercial and house property documents
Selecting the right business loan product is very important for a business’s success. Today, there are a variety of online tools that help you assess the different loan products available in the market. Be smart, select the best business loan for your business, and make an informed decision. Selecting the right financial partner can also contribute to the growth of your business exponentially.
