All You Need To Know About Business Loans
It is a form of financing offered by financial institutions to businesses. Here's what you need to know about business loans: They are designed to meet the needs of businesses, such as funding working capital, expanding operations, purchasing equipment, or investing in new projects
The types of business loans
Term loans: These loans provide a lump sum of money that is repaid over a specific period of time, usually through regular monthly installments
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It offers businesses access to a predetermined amount of money that can be borrowed as needed. Interest is only charged on the borrowed amount.
Schemes and loans backed by the government are better suited to small businesses because of their eligibility criteria, terms, and conditions.
In this type of loan, businesses can purchase equipment or machinery and use them as collateral.
Known as accounts receivable financing, invoice financing involves borrowing money against outstanding invoices to improve cash flow.
In exchange for a portion of their future sales, merchant cash advances provide businesses with upfront cash.
Criteria for eligibility
Most lenders consider the following factors when determining eligibility for business loans:
Having a good credit score increases your chances of getting approved and may result in more favorable terms. Popular lenders prefer lending to businesses with good credit scores. The MD of Poonawalla Fincorp, Abhay Bhutada, explains that the company prefers consumers with a CIBIL score of 700 or higher.
An established business with a track record of profitability and stability is usually preferred by lenders.
Depending on your business's annual revenue, you may be able to qualify for a loan.
Loans may require collateral, such as property or equipment, to be secured.
The application process
The following steps are generally involved in applying for a business loan:
Comparing loan terms, interest rates, fees, and eligibility requirements of potential lenders.
Obtain documents: Prepare financial statements, tax returns, bank statements, business plans, and any other documents the lender requires.
NBFCs such as Tata Capital, Poonawalla Fincorp, and Bajaj Finserv offer loans with minimal documentation, which simplifies the loan application process.
The lender evaluates your application, creditworthiness, and financial information to determine the risk and terms of the loan.
When approved, you'll receive a loan offer outlining the terms. Once accepted, funds are disbursed to your business account.
Fees and Interest Rates
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