Small Business Loans 2023: Here’s How to Check Eligibility, Apply, and Get It Quickly
“Money grows when you spend money” is a saying that stands true in all contexts, especially when you talk about business.
Every firm requires capital to grow, whether it is a new entrant in the market or a seasoned player who’s been in the space for a considerable time.
But what if you do not have the money to make investments and grow your business? Taking a business loan is the answer to such a dilemma. And while this may sound easy, it can’t be opted for if you stay all curled up on your couch.
Even availing of a business loan needs some strong preparation and hefty calculations. Here in this guide, we will help you squeeze in all the mandatory factors related to small business loans. Without further ado, let’s get started!
What is a small business loan?
A small business loan (or a commercial loan) as the name suggests, is a financial product provided to small business entrepreneurs to meet their business expenses.
Businesses may need funds at any phase to meet operational requirements; small business loans are a savior since they fuel business owners’ bank accounts with money. Small business loans are specifically designed to help businesses cater to any challenges a business may throw up as they move ahead to attain a competitive edge.
7 Smart Tips To Get A Loan Quickly Take Your Small Business To The Next Level
Rejected business loans may dash your scaling aspirations and prevent the growth of your business. If you are wondering how can you get a small business loan to take your business to new heights, here are the top 7 tips to ensure you get a loan quickly:
Stay prepped
If you wish to take a loan for your small business, you need to know that things won't happen overnight. It's not like having a dream one fine night, waking up the next day, and walking back with bags of money as soon as you get in touch with a lender company.
The process of taking a small business loan requires some high-end preparation. Here’s what you need to prepare and have in order while applying for a small business loan:
- Check your loan eligibility
- Be ready with all the necessary documents
- Pay your existing debts, if possible
- Dig out your financial history
- Pay heed to your credit score and try improving it before applying for a small business loan.
Have a clear rationale
When running a small business, there might be a plethora of reasons that may force you to opt for a small business loan. Be it for buying equipment, stocking products, business expansion, a requirement for working capital, or any other relevant purpose that a business owner may think of, your reason for applying for the loan must be crystal-clear.
Having a clear purpose for seeking a small business loan will not only trigger easy loan approval but can also help direct the funds into the right baskets once the loan is approved.
Tidy your personal and business credit score
If you have just started a new business and are seeking a business loan as a first-timer, you may not have any business credit history to showcase. In such a situation, what comes to the forefront for loan approval is your personal credit score.
It, therefore, becomes imperative for you to free up your personal credit before applying for a loan as it can increase your chances of getting the loan approved.
In other cases, if you have already taken business loans in the past, a good business credit score can help you win the lender's trust. The credit score is a mirror of the reliability and ability of the business owner to repay. Anything above the 750 mark is considered a good credit score to obtain easy loan approvals.
Decide on the loan amount
Are you planning to apply for any random amount without stirring the pot to determine how much you need to apply? Step back right there! Failure to work out the financial requirement for your business can lead you to swim in a pitiful flame of sorrow at a later stage.
If you apply for a higher amount than required, you add an unnecessary loan repayment burden resulting in money wastage while surplus funds flood your bank account. On the contrary, if you apply for a loan amount lower than what is required, you may end up facing a financial crunch and may make hasty, pressured decisions while using the finances.
Finalize the loan tenure
It is always suggested to go for a flexible repayment term that extends to five years if your business is not well-settled yet. The relation between the interest amount and loan tenure is linear. The higher the loan tenure, the higher will be the interest amount paid. Accordingly, decide on a suitable tenure that can help you manage the EMIs without missing it, resulting in a credit score decline.
Picking on the right lender company or bank
Numerous lender companies have popped up in the market in the name of giving loans. While most of them are genuine and authentic, some of them are only there to make profits from financially naive, innocent people. Thus, it becomes mandatory to get in touch with the right lender company to take a business loan.
For this to happen, you need to thoroughly research the terms and conditions, loan tenure, interest rate, and similar other factors pertaining to the lender. Additionally, to foolproof the process, make sure to compare the different lender companies.
Once you’re done with all the math, come up with a suitable name that caters to your business loan requisites.
Gather all your patience
Waiting to get the loan amount credited to your business account may seem like waiting forever. You need to bear in mind that once your loan proposal is submitted and approved by the lender, it may take about one to four weeks for the loan to be processed.
That is a considerable waiting time and can visibly heighten your anxieties. To make the process more hassle-free and less anxiety-inducing, make sure to keep in touch with the lender company and ask for updates regarding the loan processing.
Also, remember to be prepared with all the necessary documents and other requisites, should they be needed at a later stage during the process. This will help prevent any sort of delays and make way for quick and easy loan approvals.
Purpose of Small Business Loans
Meeting the liquidity requisites is one of the main purposes for seeking a small business loan. Here are a few more reasons that stimulate the need for a small business loan:
- Expansion of business operation
- Requirement for working capital
- Purchasing of machinery
- To repay existing business loans
- To manage cash flow
- To revive a sick business
- Managing fund requirements of a seasonal business
- To increase the cash flow
- Repairing or revamping the business unit
- For installing the latest technology
- To open a new branch or expand business in another city
- Purchasing raw materials
- Hiring seasonal employees and managing their salaries
- Stocking inventories
Features of Small Business Loans
A small business loan can help fund your business and aids in raising the working capital for business expansion. Here are a few features of small business loans that every business owner should know:
- You can get business loans at competitive rates
- They do not require you to stake a collateral
- Easy approvals
- Small business loans can also be applied online
- It requires simple and easy-to-procure documents
- Small business loans can be customized as per the loan applicant based on the loan tenure, loan amount, interest rate, and repayment ability
- You can seek an extended loan repayment tenure based on the cash flow of your business
- Flexible loan facility
Eligibility Criteria
- Age: Any small business owner between 18 years and 65 years of age can apply for a small business loan
- Business Experience: At least one year of experience in the same location
- Business vintage: 1 year and above
- Annual turnover: Minimum 12 lakhs (may differ from one lender to another)
- Credit score: 750 and above
- Nationality: Indians who do not hold any defaulted credit history.
- Entities that can apply for small business loans: Traders, Retailers, Manufacturers, Large enterprises, SMEs, MSMEs, Sole proprietorship firms, Private limited companies, and Partnership firms.
- Additional criteria: Loan applicants should own an office, shop, godown, or residence. The additional criteria may vary based on the lender from who you seek a small business loan.
Benefits of Small Business Loans
Wondering why loans for small businesses exist? Here are the top benefits of seeking a business loan:
- Small business loans are easily accessible
- They cushion the loan applicant’s burden by providing numerous repayment alternatives
- It allows hassle-free loan application because the applicant is not required to stake collateral and the documentation is also quite minimal
- Small business loans can be taken at affordable interest rates
- Offer tax reductions for businesses
- Aid in better management of finances
- Offer customizable solutions for business expansion and upgrade
- Quick disbursal of funds
- Convenient and easy to apply
- Help in sustaining your business in adverse situations
Interest Rates and Other Charges
The interest rates levied on small business loans are mainly of two types:
- Flat Rate
- Diminishing rate
Flat rate interest is calculated based on the loan amount and tenure. The interest charged on the EMI remains constant throughout the loan duration. The EMI does not reduce, and the same amount gets deducted as an EMI every month until the completion of the loan tenure.
Formula:
Interest payable for every EMI= (Principal loan amount* interest rate* number of loan tenure years)/ Number of EMI
A diminishing interest rate, also known as reducing the balance rate, lowers the interest amount every month, thus lessening the borrower's burden. It is because the interest rate is levied on the outstanding loan amount, which experiences a reducing trend and triggers faster repayments.
Formula:
Here you can find other details and a quick comparison between the interest rates and other charges imposed by different lender companies and banks.
How to Apply for a Small Business Loan
A small business loan can be applied either online or offline; here is how you can get started:
Steps for online application of a small business loan:
- If you wish to take a loan from a lender that accepts online loan applications, get started by visiting their website
- Go to the loan section and click on small business loans
- Next, download the online loan application form and fill out all the mandatory details
- Submit the loan application
- Once your loan application is received and scrutinized by the team of the lender company, submit the necessary documents and other details as asked by them
- Wait for the verification process
- If everything goes well and your loan gets approved, wait for the loan disbursal to get the loan amount credited to your account.
Steps for offline application of a small business loan:
- The very first step involved in the offline loan application process is to reach out to the office of the lender company you have finalized after thorough research
- Submit all the necessary documents and fill in all the required details
- Wait for the verification process
- If you stand eligible for the loan, wait for the lender to approve the loan and disburse the amount to your account
The bottom line
The MSME sector is known to be the backbone of the Indian economy; wherein small-scale industries have recorded a contribution of about 65-70% of the new ventures in India. That said, it is easy to predict that almost every small business seeks shelter at the doors of lender companies to tap into some extra cash reserves for operational and other business requirements. After all, money is the lifeblood of any business.
With endless funding solutions and lender companies in the market, taking credits and loans is no longer a last resort for businesses. In fact, platforms like BridgeUp have been major players in the lending space for some time. They offer convenient and feasible lending facilities that can help save your business from experiencing loss in times of exigency or even just help spread its wings and scale faster and better.
As India’s first recurring revenue trading platform, we’re dedicated to making your funding needs a reality – without having to wait for weeks and months for the capital to flow in. To know more, call us at +919819660287 or drop us a query here to get personalized assistance!
FAQs
1. Do lender companies and banks allow part payment for small business loans?
Well, this is something that may vary from lender to lender. Some banks and lender companies allow the small business owner to make part payments, although there may be restrictions on the count and maximum and minimum value of making the part payments in a year. You need to get this clarified with the lender company or bank from where you plan to take a loan.
2. How much time is taken for a small business loan disbursal?
Once you have gone through the verification process and stand eligible for securing loan approval, it usually takes about five to six business days to get the loan amount credited to your account.
3. What are the primary documents required while applying for a small business loan?
The answer to this question may differ based on the lender company from where you are seeking a loan. But here are a few necessary documents that have in order while applying for small business loans:
- PAN card
- Balance sheet for the last two years
- Address proof
- Profit and loss report
- Tax returns
- Existing loan repayment record
Based on your specific loan case, additional documents may also be asked for by the lender company.
4. How do I get to know if my loan application is approved?
If you have applied for a small business loan online, you can check out the same on the company’s portal using the loan application reference number. Additionally, you can also get in touch with the customer executives to know the status; the same rule applies when you take an offline small business loan.
5. Is there any fixed interest rate for a small business loan?
No, the lending rate is variable and may differ based on the lender company's terms and the loan applicant's credit status. The interest rates may also change, considering the government guidelines of your location.
6. Where's the easiest place to apply for a small business loan?
Though there are numerous platforms where you can seek small business loans, BridgeUp marches ahead of all its competitors to give you loans at affordable interest rates. Owing to their high-risk appetite and ability to trust new entrants in the market, BridgeUp can successfully fund small and large enterprises (including anything in between) in a steady and profitable manner.
