Several businesses across India rely on financial institutions to secure business loans. These range from MSMEs to corporates. Business loans are required for different activities such as capacity expansion, large scale marketing and maintaining working capital.
Every business is different hence financial institutions have introduced various types of business loans. There is a short term loan, working capital loan, Business Line of Credit, Invoice Financing, Equipment loans etc. Depending on the type of business and loan amount, you can choose the best one suiting your needs.
However, choosing the best business loan in India can be tricky. There are various factors to be considered while choosing the loan and hence one needs to have well-researched insights before applying for any kind of loan.
Now it is easy to apply for online business loans. All you have to do is to log in to the lender’s website and raise a request. There will be an agent assigned who verifies the application and processes it further. Let us look at those important factors which help you choose the best business loan.
Factors to Choose The Best Business Loan Are:
1) Make a Note of Your Requirements
Before applying for a loan, you should ask these questions to yourself – How much money do I need? Do I have any Collateral? How am I going to pay the EMI? Once you know the answers to these questions, you are good to go! While applying for a loan you should know that monthly EMIs can be hiccups if not planned properly. Also, having collateral increases the chances of getting a higher loan amount. The asset which is used as collateral while taking a loan can be seized if the loan is not paid right on time. All these things should be kept in mind.
2) Lower Interest Rate
One of the most important factors to consider while choosing a business loan is the interest rate. Lower interest rate avoids the extra burden and helps you to pay the loan quickly. Always choose the lender with a lower interest rate. Also, keep the loan term in mind because there are chances that the lender may cheat you with lower interest rate and higher tenure.
The average interest rate for a business loan in India starts from 10.7% and ranges up to 20% which depends on the financial institutions. Having no assets can cause a higher interest rate.
3) EMI Calculation
Calculate your monthly expenses such as monthly bills, grocery bills, school/tuition fees, etc. Keep aside some funds for any type of emergency. Deducting these from the total income will give you the amount left to pay monthly EMI. Based on this amount you can decide the loan amount, lock-in period, etc.
If you don’t calculate and apply for Business loan randomly then paying EMIs would be quite difficult. Most of the lenders provide business loan EMI calculator on their website where you can enter the total amount, interest rate and tenure to see the EMI calculation.
4) Quick Loan Approvals
When you need funds immediately, picking lenders with delayed application processing time can cost you heavily. Quick loan approval and disbursement help you kick start the business without spending much time on the procedure. Otherwise, most of the time and effort are wasted on the follow-ups!
5) Fees and Charges
Lenders charge processing fees on every business loan application. Along with this, there will be charges on failed EMI payments, canceled cheques etc. Most of them don’t disclose these charges until and unless you enquire about them. Getting detailed information about any such charge is wise while applying for loans.