Business Loan: Top 5 Crucial Questions Before Applying
A business loan is the first thing that comes to mind; after a long and sincere attempt to come up with an achievable marketable strategy, the last element in getting the job done is subsidy.
Despite the fact that there is nothing wrong with this idea, there are different issues associated with taking the obligation correctly at first, it is necessary to answer five essential questions:
1. Is the business loan required?
As mentioned earlier, a business loan has many implications. Therefore, consider all the angles before opting for it. If there are untapped private sources of finance, the loan may not be necessary. When a better option is available, going into debt won’t make business sense, so explore all financing options before taking out a loan. For example, family and friends might lend money on friendly terms or without interest. Or angel investors can lend on more favorable terms compared to conventional lenders.
If funds are required, one can opt for a term loan or a line of credit as needed. The precise amount needed to maintain cash flow could also be decided. If these questions are answered, he can ensure that the debt and its repayment stay under control.
2. What will the interest rate and the total cost of capital be?
It is essential to know the interest rates of the business loan and the cost of capital. A short term loan attracts higher interest rates, which a new business may not handle. Some lenders offer monthly interest rates, so insist on knowing the annual rate.
In addition, the processing fees and other costs must be transparent before availing the loan to know the exact amount to be repaid and the penalties for late payment, thus avoiding unpleasant surprises afterwards. These factors will also help in deciding on the lender offering more favorable terms. A business loan calculator is very helpful in getting an idea of the interest rate and the total amount to be repaid. If these factors are ignored, borrowers might find it difficult to pay EMIs.
3. How much should I borrow?
Determining how much to borrow will depend on many variables such as funds available, when the money will be used, estimated gross annual sales, etc. Proper analysis of fund requirements is vital as lenders will ask questions about these issues before sanctioning a loan.
4. Will there be an in-branch assessment after the loan application?
Whenever one applies for a business loan (or any other type), potential lenders will assess the applicant’s credit history and creditworthiness through a credit bureau. A superficial investigation initiated by the borrower himself is considered a soft draw and does not affect the credit rating. Conversely, a detailed review of lenders is recorded in the office records. Too many of these requests can impact a borrower’s credit rating and a complex assessment.
Avoid a difficult appraisal as it can affect the chances of getting a business loan or getting approved on favorable terms in the future. To do this, only apply to one lender, when the eligibility criteria are met. Also, before applying for a business loan, make sure that the credit rating is healthy to increase the chances of approval. This can be achieved by paying off past debts and ensuring that all EMI payments are made on time.
5. What does the credit history and score look like?
As pointed out above, credit score and history could make or break the chances of getting a business loan. Or they received the business loan on more favorable terms. Since lenders will check both personal and business credit history and score, loan applicants should verify details before contacting a lender. Personal and business credit history can be checked through a credit bureau. Banks, credit card companies, and financial platforms such as Paisa Bazaar and Policy Bazaar also provide free credit history reports. The higher the credit rating, the greater the chance that the business loan will be approved on favorable terms.
Business loans in just a few clicks
Now that these questions have been answered, the necessity and the amount of the business loan will be evident. For aspiring entrepreneurs (and others) who do not qualify for a business loan from traditional lenders, Clix Capital is always here to meet their needs, big or small. These can include working capital needs, expansion plans or more.
Business loans can range from INR 5 lakh to INR 50 lakh as an unsecured credit instrument. These loans include business term loans and working capital loans. The former finances investments for expansion, purchase of tools / machinery and related needs. The latter can be used for a variety of purposes, such as funding daily business expenses to free up internal burdens for other purposes.
To be eligible, a candidate must be at least 21 years of age at the time of applying and under 65 years of age at the end of the term. The business can be a sole proprietorship, limited liability company, private unlisted company, or partnership company involved in manufacturing, trading or services with a minimum turnover of INR 1 crore. Additionally, audited financial statements should be available for the past two years, with most businesses routed through the banking system or the previous year’s revenue captured through GST returns. Finally, the entity must be concerned with a minimum total year of activity of three years in its current field of activity. If the questions are answered in the affirmative, a business loan from Clix Capital can be easily used.
The company’s transparent business loan process ensures that credit can be approved in minutes after all details are verified. Repayment terms can be between 12 and 36 months, depending on the budget and the repayment capacity of the applicant.
The only documents required address and identify proof, financial statements and proof of business ownership. As a result, it is time to make sure that nothing comes between a borrower’s business ambitions and their fund requirements except for a few clicks to qualify for a Clix Capital business loan.
About Clix Capital
Clix Capital is a new era of NBFC that is revolutionizing the lending space by offering differentiated digital lending products based on technology and in-depth analytics. It offers a range of loan products to various clients in the MSME and consumer segment, including personal loans, MSME loans, health loans and mortgage finance.
Clix is co-founded by industry veterans Mr. Pramod Bhasin and Mr. Anil Chawla and is backed by a private equity fund AION Capital Partners Limited (a subsidiary of Apollo Global Management, LLC – one of the largest alternative investment managers in the world with AUM of 433 billion). Mr. Bhasin is the founder of Genpact and the former CEO of GE Capital India and Asia, and Mr. Chawla was the former CEO of GE Capital India and Asia’s Commercial Finance Business.
Together with Mr. Bhasin, Mr. Chawla and AION jointly acquired the commercial lending and leasing business of GE Capital India in September 2016 and renamed it Clix Capital.
Article reviewed and published by Gauri Malhotra.