business loans

Business Loans – Unlocking Finances for New Business Ventures in India

Launching a new venture is an exciting yet challenging endeavor. Starting a new business needs substantial capital investment, which may not be readily available to many. Therefore, aspiring entrepreneurs may need financing solutions to turn their business ideas into reality and fuel growth. In that case, a business loan for new businesses in India is a great option.

Business Loans for New Businesses in India 

Lending institutions offer loans for new ventures at affordable rates to help them grow. It is a valuable financial product that allows new entrepreneurs to unlock the required funds for their ventures. Above that, the new business loan eligibility is simple and can offer adequate funding.

Key Features of New Business Loans

●      Loan Amount – The loan amount can be up to Rs 50 lakhs to meet varied business needs, including working capital, asset purchase, etc.

●      Repayment – A business loan for new businesses in India is flexible enough to allow you to repay the loan conveniently. It can be 12-48 months. Stay focused on business growth rather than worrying about repayment.

●      Collateral – Since small-scale business loans are unsecured, lenders do not ask for collateral.

●      Documentation – You only need to submit basic documents to avail a business loan.

Eligibility to Secure a Loan for a New Business

The common set of eligibility parameters is as follows:

●      A resident citizen of India can apply for a business loan for a new business in India.

●      The age limit is 21 – 65 years.

●      Maintain a credit score of 700+.

●      The business should be operational for at least three years and have experience of at least 5 years in business.

Thus, business loans with easy eligibility are an effective financing option for small businesses. Go through the lender’s official website and apply online to unlock finances for your business venture.

Also Read: What You Need to Know About Mortgage Rates in 2023

Tips To Save Interest On The Business Loan 

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Low interest rates on loans save time and money, and also help repay the debt quickly. Instant business loans help run businesses and firms to tide over financial crises. 

Taking business loan is easy these days as business loans have reduced interest rates. Check your business loan eligibility so that you can easily apply for it.

Here are some tips for a lower interest rate –

  • Improve your credit score

To reduce the interest rate, check your credit score. A good credit score defines the credit-worthiness and credibility of the company. It reduces the credit utilization score, and it helps to get a lower interest rate 

  • Pay your EMI on time

Paying EMI on time helps maintain a high credit score and improves the chances of getting a lower interest rate. 

  • Get MSME loans

MSME business loans are designed to help small and medium enterprises. These loans allow businesses to grow, as lenders offer low-interest rates and easy repayment of the loan.

  • Business credibility

A credible business history helps create high credibility for a business, which helps lower the interest rate.

  • Improve business financials

If you have a flourishing business, the lender will offer you low-interest rates as they depend on factors like financial position, project credibility, and turnover.

Follow the above tips and get the offer of a low-interest rate for your business loan. Get an instant business loan by analyzing your business loan eligibility.

Additional Read: Manage your business expenses this festive season with a Business Loan

Thinking of Taking Unsecured Business Loans? Here are the Advantages!

An unsecured loan does not need collateral. Instead, it is granted based on the borrower’s credit history. Small business owners are the most likely candidates for these loans.

One can also use it to provide additional capital to a company to help achieve its objectives. Though the traditional definition of unsecured business loans is that no collateral is required, the reality is quite different.

Interest Rate on Unsecured Loan

The interest rate on unsecured business loans issued by major financial institutions and NBFCs starts at 14.99% per year and goes up from there. The business loan interest rate is determined by several factors, including the applicant’s financial history, CIBIL/credit score, repayment ability, creditworthiness, annual turnover, and so on.

Unsecured Business Loans Have Many Advantages

  • Easy loan process: The application process is simple, and anyone with a basic understanding of computers can complete it.
  • Provides versatility: Unique Flexi-loan feature and collateral-free business give a lot of freedom.
  • Very little documentation: Minimum documentation and very little paperwork required.
  • Loan disbursement is quick: Due to less paperwork, the loan disbursal is faster, which helps when businesses need quick cash.
  • No limits on use: Unlike secured business loans, which you can obtain after identifying the purpose, unsecured loans have no such restrictions.

An unsecured company loan could help you reach your business goals, whether you’re having cash flow problems or need a hand keeping day-to-day operations going smoothly. They can be especially beneficial to small enterprises in their early stages of development.

Must Read: Manage Your Business Expenses This Festive Season With a Business Loan

Where Can You Use Short-Term Loans for Your Business?

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Businesses require proper funding to grow at their optimum pace. Short-term loans are the perfect solution to financial crunches or lack of funds in businesses. Short-term loans can be used for the following purposes:

  • It is always important to stay prepared, but some situations arise out of the blue and can cause severe damage to your business’ finances. Availing of a loan with a competitive business loan interest rate can help your business stay afloat through such trying times. 
  • You can use borrowed funds to expand your business. Business loans assist you in covering the costs of renovations, hiring more employees, marketing, etc., which eventually enables the expansion of your business.

  • One of the main aspects of being the best in your niche is to have up to date equipment. But they are quite expensive, and many businesses do not have the funds to finance them. In such instances, a short-term loan is the best option to explore.

  • Some businesses are seasonal, and it can be challenging to bring in substantial revenue during off-season times. A short-term loan can help keep your company running during this time by helping pay for salaries, inventory, power bills, rent, etc. 

Instead of compromising on expanding your business or risking its shut down, it is advisable to undertake a short-term business loan. Once the funds are used to their optimum potential and a return on investment is received, you can pay off the debt. Get started now and find a lender that offers competitive interest rates and flexible tenures!

Must Read: 7 Reasons Why Unsecured Business Loans Are Financially Beneficial for Small Business

Aspects of Credit History that Impacts Business Loan Approval

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Good credit history is an integral part of your business loan application. It indicates to the lender how reliable you are. The following aspects of your credit history are considered when availing of a business loan. 

Aspects of Credit History that Impacts Business Loan Approval

  • Defaults in Repayment 

It is always good to make timely EMI payments. Even after the deadline, you will be given a few days to make the instalment. Missing this deadline as well is sure to take a hit on your credit history. If your debt repayment is consistently late or missing, then it heavily impacts your chances of availing of a business loan. Even if a business owner does get a loan after this, the business loan interest rate would likely be higher than average. 

  • Bankruptcy 

If you have ever filed for bankruptcy, your chances of availing of a business loan are slim to none. It is bound to reflect poorly on your credit history for a minimum of 10 years.

  • Debt to Income Ratio (DTI)

DTI is the percentage of disposable income going towards debt repayment. A DTI higher than 50% makes loan application acceptance less likely. Especially since a majority are unsecured business loans, the lender becomes even warier. 

Business loans can play a massive role in the success of your business. However, availing it is only possible if you are deemed a worthy borrower by the lender. Fullerton India’s business loans are here to help you through flexible repayment tenures and competitive interest rates so that you can expand your business!

Must Read: How We Can Get an Unsecured Business Loan?

Get Quick Approval for Business Loan – A Step by Step Process

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Running or starting a new business requires a lot of capital. The initial cost of setting up the infrastructure and operating for the first few months without a lot of profit are too hard to manage. Getting an instant business loan is very easy these days. Financial institutions offer personal loans for business at a very low rate of interest. If you are planning to apply for a personal loan, then the following step-by-step guide will help you in getting a quick approval. 

Step-by-step process for Quick Approval for Business Loan

  1. Understanding the Types of loan you want

There are different types of schemes available. Whether you want a term loan, a cash credit facility, an invoice discounting or you want to go for Government backed initiatives will decide the type of application you have to fill.

  1. Research

Doing an initial research online will save you a lot of time. You can choose the best scheme that is being offered by one of the best financial institutions and straightaway apply on their website.

  1. Importance of Credit Score

You should know your credit score and keep it higher than the threshold required to apply for a loan. A good credit score will ensure that your loan gets processed without any roadblocks.

  1. Collateral

Ask your lender if any collateral will be required for the loan. Prefer a lender which does not take collateral for a small amount of loan. Avoiding collateral will save a lot of time and the processing can be done very quickly.

  1. Documentation

If you apply for an instant business loan, then the entire application can be done through online mode. If everything is found in place, then the processing can be completed in the next 48 hours.

Follow these 5 steps to get quick approval of your personal loan.

Additional Read: 7 Benefits of Having an Online Presence for a Business

Learn the Differences Between Fixed and Variable Rate Business Loans

If you want to apply for any form of a business-specific credit line, you need to understand the basics of chargeable interest rates. As a matter of fact, lenders usually levy either fixed or variable interest rates on the business loans (https://www.fullertonindia.com/business-loan-interest-rates.aspx), which eventually determines the cumulative sum that is to be paid at the end of the tenure.

In the subsequent sections, we shall take a closer look at the primary differences between fixed and variable rates associated with a business loan:

  1. Uniformity

Fixed business loans are the ones where a single rate of interest is used to calculate the interest payable during the entire term tenure. However, according to the name, variable rates depend on the Swap Rate, CDR, or any other index while changing multiple times throughout the loan tenure. 

  1. Financial Stability

Variable interest rates are better if financial stability at the onset is your primary concern. In case you choose business loans with floating rates from credible lenders, the initial rates are way lower than the market staple. Although the rates go up after a certain point of time, the initial support allows you to manage startup finances, better.

  1. Minimal Worries

If your venture is based on a steady model, a fixed business loan interest rate is expected to serve you better. Moreover, you need not take the changing market conditions into account as the interest rate remains the same throughout the tenure. 

Both variable and fixed business loans have their share of benefits and advantages, based on the existing financial stead and upcoming growth prospects. 

Additional Read: Follow these Easy Steps to Get A MSME Loan

Business Loans Or Overdraft: Pros And Cons

If you plan to expand your current business or start a new business, then taking a business loan or overdraft might have crossed your mind. Both of the financing products can be used to fulfill your financial requirements. 

 So, keep reading this article to know about the advantages and drawbacks of both the credit facility to help you find the right financing product for your business.

Business Loans

  • Pros
  1. You can easily borrow a massive amount for a long duration.
  2. Longer tenure leads to flexible and affordable monthly EMIs. So, there won’t be any stress on your monthly budget. 
  3. The eligibility criteria are easy-to-meet for business loans.
  4. You can quickly get competitive business loan interest rates.
  5. Business loans offer a fixed rate of interest. Therefore you know how much you need to repay.
  6. No tedious documents are required for a business loan. So, the entire application process is hassle-free.
  7. It can be availed by various entities, including individuals, women entrepreneurs, manufacturers, NGOs, traders, private and public limited companies.
  • Cons
  1. Generally, business loans are unsecured loans, but in some cases, it may require collateral.

Overdraft

  • Pros
  1. The borrower can freely decide the amount to be repaid each month.
  2. The borrower can speak to the lender about a tailored overdraft agreement and can quickly close the overdraft at any time.
  3. The application process is flexible.
  • Cons
  1. The interest rate is relatively high as compared to business loans.
  2. The current customer can only avail it from the financing institution. 
  3. Various additional fees such as application fees, monthly overdraft fees, and late payment fees are applicable.
  4. The financial institution can even cancel the overdraft without any notice. 

Conclusion: A business loan is a viable option to meet long-term business requirements. Both of the financing products have their advantages and disadvantages. So, choose the credit facility that meets all your needs. 

Must Read: 5 Ways to Get a Small Business Loan For a New Business / Startup

What are the Primary Criteria Used By NBFCs to Approve Business Loans?

Financial backing is the backbone for any startup or for a business owner who is trying to scale. The financial institutions have made the lending process reasonably flexible so that new business owners find it easier to avail loans. However, there is a structured way for the firms to apply for such business loans to ensure no delay in processing or even no rejection of applications. Hence it is imperative to understand the significant criteria that lenders use for a hassle-free process.

As mentioned before, lenders have set out a process to qualify the borrowers who apply for business loans. Likewise, as a borrower, you can also use a business loan EMI calculator to decide on the best lender for your loan requirements. Few of the ways by which a lender would qualify you as a successful candidate for the loans are below:

Creditworthiness

NBFCs would use the credit score to determine the repayment abilities of the borrower. If your score is more than 700, you stand a high chance of loan approval.

Supporting collaterals

Sometimes, the lenders would ask for collateral to approve the loan faster if they sense a risk with your loan application.

Financial capacity

The financial institutions would also gauge the capacity of the business through their balance sheets and other statements.

Conclusion

Apart from the above factors, the lenders would assess the documentation provided by the lending institution to qualify them for the loan.

Must Read: How to Apply Online for a Business Loan and Get it Approved?

Here’s Different Types of Business Loans Available in India

Business loans are required for starting a new business, expanding an existing business, upgrade plants and machines, maintain capitals or to manage the cash crunch. Several bank and NBFCs offer business loans in India for finance your business expanses for small and medium enterprises if the borrower meets the eligibility criteria and has a good credit score.

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Different types of business loans offered in India:

  • Professional Business Loans 

Professional business loans are sanctioned to professionals like doctors, chartered accountants, and lawyers who have a good credit history. It is at the discretion of the bank and NBFC how much loan it wants to extend to such borrowers and in many cases, some kind of collateral security is taken in the form of property, government bonds, life insurance policies, etc. The professional business loans usually have tenure of 5-7 years.

  • Overdraft loans

Overdraft loans are normally sanctioned by pledging fixed deposits of the bank and NBFC. Depending upon the credit history of the borrower, cash flows, tenure of bank and NBFCing relationship and the repayment history of the business or individual promoter, the bank and NBFC approves a certain fixed overdraft limit. Based on the limit, the overdraft amount can be utilized and interest is charged by the bank and NBFC only on the utilized amount. This loan can be utilized in any manner as long as the principal and the interest are being repaid on time.

  • Working capital loan 

In a working capital loan, the bank and NBFCs sets a limit for the business to take a loan and the amount can be utilized in a specific purpose only, i.e. the working of the business and cannot be utilized in any other manner. This type of loan is sanctioned against the defined purpose and the plan of the business.

There are multiple other options when it comes to business loans. These vary from one institution to another, it would be really helpful if you talk to a few of them before deciding upon a particular one to get the arrangement according to your parameters.  

Additional Read: What Are The Types Of SME Loans Available In India?