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Key Points To Consider Before Applying For Business Loans
Running a business involves a lot of responsibility on the part of the business owner. The success of the business rests on his shoulder. He puts his blood and sweat to start the business and run it efficiently. He also invests all his savings in the business. During the initial phase of the business, he may have enough funds for the business. But later, he runs out of money to operate a business.
It is the point in time where he feels availing funds from external sourcing is the ideal option for him. Thus, the best option here is to apply for a business loan from any of the numerous financial institutions in India.
Business loans are a popular source of funding, and it is offered by financial institutions. The money availed under a business loan is used to manage critical business-related expenses. The loan for business can be secured or unsecured. Due to the rising demand for the availability of easy credit for small business owners, many NBFCs have emerged in recent time. And they have also become the preferred choice of small business owners.
It should be understood that applying for a business loan is not an overnight process. The business owner should gather some knowledge about the things to make a sound choice. Let’s take a look at the things that a small business owner must consider while applying for a business loan in India.
Check CIBIL Score
Due to rising NPAs in recent times, most loan lenders have become very particular about loan eligibility. CIBIL or credit score is one of the most important eligibility criteria. It ranges between 300 and 900 and is a numerical representation of the creditworthiness of the borrower. The credit score of the business owner should be at least 700 to be eligible for an SME loan in India. A high score also ensures that the lender offers loans at low interest rates.
The business owner needs to assess his requirements and calculate the amount required. Notably, the loan amount carries an interest cost. Therefore, it should be carefully assessed and then availed. A business owner should only avail the amount which will suffice his requirements. So, sit down, assess the exact loan amount required, and apply for a small business loan.
APR – Annual Percentage Rate
APR is the total cost of the business loan in a year. It consists of all the costs associated with the loan, including interest cost, processing fee, file charges, etc. APR gives a clear idea of how much the loan will cost to finances. It is very crucial to know the APR as sometimes lenders may charge lower interest rates but levy charges which would make loan expensive.
Research & Negotiate
Always remember, even a slight reduction in the interest rate may save a lot of money. So, make a point to negotiate with the business owner and get the best business loan deal.
The abovementioned five essential tips can be very beneficial while choosing the best business loan product and lender.