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Get a Business Loan to Start Your Dream Small Business

A business loan is designed uniquely to fund the operations and/or capital expenditures of a business. The injection of funds can help your business during periods of economic downturn and they can also be utilized to aid the growth of your business.

What type of Business Loan suits your need?

Do you want to start your own business? In this article learn how to apply for a business loan to help you kick-start your business.  Your business may have specific loan requirements, as such, we will discuss the different types of loans that exist.

  • A Term Loan is a loan for a fixed amount with a clear-cut repayment schedule. The business loan interest rate is issued as a variable interest rate, which means it can change over the period of the loan. You can use term loans for monthly expenditures or to acquire fixed assets, such as, equipment. A more specific loan known as working capital loan is available to handle day to day expenses.
  • Unsecured Loans is given to customers’ based on their credit rating. The credit rating of your business will determine your ability to pay back the lenders in a timely manner as agreed in the contract. Financial institutions will look into your business’s credit history and figure out your credit-worthiness. Keep a good balance to get approved for your business loan. Similarly, secured loans are endorsed by your collateral. Failure to repay the loan, will lead to the lender selling your asset to recover the money.
  • Acquisition Loans are short term loans used by companies to purchase a predetermined asset. These loans can be used to acquire another existing company. You also have self-liquidating loans in which cash is recovered by money generated through the purchase of assets.
  • Loan Against Property you can get the loan against property, if you have own assets or property then you can get easy loan.

Get a Business Loan to Start Your Dream Small Business

Words of the Wise

Take note of the following pointers before applying for a business loan.

  • What is the Loan For? Ask yourself why your business requires a loan. It’s possible that there’s another solution and you may not even need to borrow money. If you are trying to finance the loss your business is making or buy an asset that doesn’t generate income, opting for a loan is a terrible idea. On the other hand, buying an important piece of equipment that will aid your business at an appropriate time is a good reason to go for a business loan.
  • Establish the Budget: An accurate forecast of the loan amount that is required by your business should be made before applying for one. Don’t over or under-estimate your needs.
  • Know your Boundaries: Ensure that you can repay the loan. Your debt payments should be less than 30% of the total monthly income.
  • Build Relationships With Lenders: Having good relations with the lenders can help get your loan approved, as people tend to do business with people who they like. Don’t worry this isn’t a requirement but it does help. When you’re on friendly terms with the lender, they will act as a guide and advise you.

If you want your business to grow then invest in its expansion by securing your finances through a business loan.

There are Few Eligibility Criteria for a Business Loan

You should be one of the following for getting a Business Loan:

  1. Private Limited or Limited Firm
  2. Firm of Partnership or Proprietorship
  3. Professional Self-employed
  4. Manufacturer or Service Provider

There are Some Documents that you Need to have Ready

  • Home Equity
  • Business Inventory
  • Equipment
  • Vehicles

How Business Loans help Start-Ups/Small Businesses Etc.?

More than anything, countries such as India are witnessing a rapid rise in the growth of start-ups etc. Both young and old professionals are increasingly venturing into a space where they want to break free from regular employment and do something of their own. This mentality is the reason why start-ups, small business ventures etc. are on the rise.

Now, if you are a small business or even a start-up, the leverage of capital is going to be one of your main issues or shall we say, it was until some years ago. Today, with the advent of programs such as Make in India, Digital India etc., such commercial initiatives are being encouraged where they understand how young talent can make the nation grow.

Several banks and lending institutions such as Bajaj Finserv are encouraging such business owners to establish and grow their business with business loans of upto 30 lakhs.

As a borrower, one needs to remember that regardless of where you are borrowing from, be that a bank or a lending institution, the prime concern there will not be the amount of money which is being asked for. Instead, banks decide upon your borrowing strength by considering your reason for the loan, the effectiveness of your strategy in the long run, your ability to pay back duly etc. So, while arranging for a business loan may take different amount of time when considering a big corporation and comparing it to a small business, it is not completely difficult to actually borrow money for your venture.

What Does Taking A Business Loan Actually Mean?

While taking a business loan can mean many things for your business from starting it up to ensuring a new life for it by pumping cash, the actual process once your loan gets approved is going to be majorly about money management. Ensure that the business plan you drew up in order to avail the loan is adhered to after the approval.

This will enable you not only to sustain the cash flow but also empower you to repay the amount as fast as possible.

Please make the sure you have the right documents required for the loan and that your business plan accounts for some form of contingency.

Business loans will allow you to run your business as efficiently as you desire.

Images “ Business loan road sign /  Shutterstock.com

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Arwind Sharma is a financial advisor with an experience of more than 15 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India. Currently based in Pune, Arwind Sharma is a name to reckon with when it comes to financial management for big brands. A post-graduate in business economics, he is an alumni of Princeton University, USA. During his free time, Arwind teaches children from marginalised sections of society and also work on his blog on photography. https://www.bajajfinserv.in/investment/fixed-deposit/fixed-deposit.aspx

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Comments
  • Welcome to Tweak Your Biz Arwind. Thanks for explaining all the different types of small business loans and what you need to do to apply. This can be a daunting task for many so laying it out so simply will really help many I’m sure. I look forward to your next post for us.

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