5 Business Loan Problems and One Solution to Resolve Them

Business loans offer businesses the necessary funds to maintain cash flow and grow at will. This is why business financing plays a big role in helping entrepreneurs and small businesses grow. From team expansion and equipment purchase to managing daily business operations, a business loan offers just what you need. However, many small business owners face problems like strict eligibility, high interest rates, long approval times, confusing paperwork, and a lack of guidance.

As per a recent report, reveals that only 14% of MSMEs in India receive loans from traditional lenders. It shows how difficult it is for small businesses to access the funding they need to grow. Here are the five common business loan problems and tips to overcome them.

Problem #1: Difficulty in Meeting Eligibility Criteria

One of the biggest problems small business owners face when applying for business financing is meeting eligibility criteria under the business loan requirement rules set by lenders. If you don’t meet the criteria, your business loan approval can get delayed or even rejected.

Traditional lenders look at many things before giving you a loan. Some important business loan eligibility criteria include:

• Applicant’s Age: You must be between 21 and 65 years old
• Business Type: The type of business you run (like a proprietorship, private limited company, or partnership)
• Business Age: Your business age must be at least 2 years
• Turnover: Your business turnover must be at least ₹1 crore
• Business Documents: Good financial records like bank statements, audited accounts, or GST returns
• CIBIL Score: A CIBIL score above 700 and a steady income

Private and public banks traditionally have strict eligibility criteria. However, many NBFCs now offer collateral-free business loans with flexible business loan requirements. NO matter the situation, here are the tips you can follow to improve your chances of business loan approval:

• Keep your finances clean and updated, as it shows a lender a clear picture of the business’s transactions.
• File your taxes and GST on time, as it shows that your business is compliant, stable, and transparent.
• Use the banking system regularly to make cash flow analysis easier for lenders.
• Pay your EMIs and credit card bills on time to keep a good credit score.

FlexiLoans is one of the most reliable business financing partners in India that has easy-to-meet eligibility criteria. It offers a business loan of up to ₹50 lakh at an interest rate of 12% per year. You will also enjoy approval within 48 hours.

Problem #2: High-Interest Rates and Unfavourable Terms

High interest rates and unfavourable business loan terms are becoming major issues for businesses. As loan repayment rates rise, it becomes difficult for MSMEs to face financial situations. With higher monthly payments, businesses struggle to meet obligations, leading to a higher risk of default.

When interest rates go up, businesses have to pay more money on their loans without making more money to balance it out. This can be challenging for small businesses to cover essential costs like payroll, rent, and inventory.

Higher interest rates also impact sales and profit margins. Small businesses, in particular, struggle to maintain profitability as both financing costs and operating expenses increase. We have enlisted some MSME loan options to ease out the loan repayment challenges:

Loan Scheme	Target Audience	Loan Amount	Key Benefits
MSME Loan in 59 Minutes	MSMEs	Up to ₹1 crore	Quick approval, minimal paperwork
FlexiLoans	MSMEs	Up to ₹50 lakh	Quick approval, low interest rate, minimal paperwork
Pradhan Mantri MUDRA Yojana (PMMY)	Small businesses	Up to ₹10 lakh	No collateral, suitable for small enterprises
Credit-Linked Capital Subsidy Scheme (CLCSS)	MSMEs needing tech upgrades	Up to ₹1 crore	15% subsidy on technology upgrades
SIDBI Loans	MSMEs	₹10 lakh to ₹25 crore	Flexible repayment, supports business growth
Udyogini Scheme	Women entrepreneurs	Up to ₹1 lakh	Supports women in business with easy access to loans
NSIC Financing	MSMEs	Varies	Helps with raw material and marketing funding

Problem #3: Insufficient Loan Amounts

Obtaining insufficient funding when they apply for a business loan is one of the most common problems that business owners face. Even if the bank approves their loan, the loan amount for business is often too small to cover all the costs, like buying equipment, hiring staff, or growing operations. This makes it hard for the business to survive or grow.

For example, a small business might need ₹10 lakhs for either machinery or raw materials, but only get ₹3 lakhs approved. This puts pressure on the owner to cut corners, negatively affecting growth, business operations, and investment in essential resources. Underfunded loans also lead to cash flow issues and missed opportunities.

Being a small business owner, you can struggle with insufficient loan amounts. The solution is to explore other funding sources like government schemes, NBFCs, or online lenders like FlexiLoans. You can also consider combining a small loan with a grant or investor business funding. In a nutshell, when you plan the funding mix smartly, you’d better avoid being stuck with too little money.

Problem #4: Lengthy Approval Process

A delay in business loan approval time affects businesses that need quick access to funds, especially during emergencies or peak demand periods. Here are key pointers on how long loan approval times can negatively affect businesses in urgent need of funding:

• Lost Opportunities: Loan process delays can cause you to miss time-sensitive deals, partnerships, or growth chances.
• Cash Flow Stress: Without quick funding, you will struggle to pay suppliers, employees, or manage inventory.
• Poor Credibility: Inability to deliver due to cash constraints can harm relationships with clients and vendors.
• Operational Disruptions: Essential activities like production, marketing, or expansion will stall.
• Competitive Disadvantage: While you wait, competitors with faster funding may capture your market share.

MSMEs facing slow loan approval are recommended to consider applying to lenders with fast business loan approval, like FlexiLoans. We speed up loan approvals with collateral-free loans and minimal paperwork. It will speed up your access to capital and offer more flexible terms to better meet your needs.

Problem #5: Repayment Stress and Cash Flow Issues

When you manage business loan repayment, it fosters healthy cash flow management. However, it can also become a major source of financial stress. If your monthly EMIs are high or your income is inconsistent, your business might face difficulty covering daily expenses. This can lead to late payments, reduced creditworthiness, and disruptions in operations. To reduce this stress, you can follow FlexiLoans tips to improve cash flow management:

• Set clear repayment goals and timelines.
• Track your expenses regularly to avoid surprises.
• Automate EMI payments to prevent missed deadlines.
• Build a financial buffer or emergency fund.
• Reassess and adjust your budget as business needs change.

Additionally, if you’re juggling with loan repayment stress, handling multiple loans or facing tight repayment terms, consider refinancing or consolidating your loans. This can lower your interest rates or extend your repayment tenure, making cash flow more manageable.

One Solution: Choosing the Right Loan Provider and Plan

Business owners face 5 common problems regarding business loans: strict eligibility criteria, high interest rates, long approval times, insufficient loan amounts, and repayment stress. These business loan issues affect small businesses’ cash flow, delay operations, or even stop growth.

While you may face these business loan issues, the only solution is to choose the right business loan provider with the right plan. You can compare lenders, understand their terms, and use smart tips like budgeting and refinancing to overcome these challenges.

FlexiLoans is one of such best business loan options that offers quick approvals, flexible plans, and minimal paperwork for growing businesses. It offers several advantages that make it a strong option for business financing.

• Collateral-Free Loans: Access unsecured business loans up to ₹50 lakh without needing to pledge assets, making it easier for small businesses to obtain funding.
• Quick Disbursal: Benefit from fast loan approvals and disbursals, often within 48 hours, helping you seize business opportunities promptly.
• Flexible Repayment Terms: Choose repayment tenures that align with your business cash flows, ranging from 12 to 36 months.
• Competitive Interest Rates: Enjoy interest rates starting from 1% per month, tailored to your business profile.
• Minimal Documentation: Simplify the application process with minimal paperwork, making it accessible even for businesses with limited documentation.
• Customised Loan Products: Whether you have an MSME, a woman entrepreneur, or a startup, FlexiLoans offers tailored loan products to meet diverse business needs, making it a smart loan choice.

Conclusion: Navigating Business Loan Challenges with the Right Solution

While the issues will always persist when applying for business loans, you can overcome them with a few tips. By following these tips, you can increase your chances of approval for the best business loan solution. Once the business loan is approved, you can use the financing to accelerate your business growth and ease financial pressure.

On this journey, FlexiLoans is the best partner that not only offers favourable terms but also flexible repayment options. We are the trusted business financing provider known for simple and fast approvals. So, take action today and find the loan that fits your small business!