Small Business Loan Guide – The Things you need to know

small business loan guide

No matter what segment your business belongs to money will always remain an imperative element. Any business that is scaling up or extending its services will need to arrange finances for its uninterrupted expansion. Many small businesses today seek financial assistance by opting for a business loan. Considering, the current scenario business loans are the best options that help your business get going. Furthermore, business loans can be availed to meet the following business demands:

  • Business expansion
  • Purchasing equipment
  • Maintaining inventory
  • Starting a new venture
  • Meeting working capital requirements

Getting a small business loan today is much easier than ever before. There are a number of lenders in the market who are competing to garner the attention of borrowers. Therefore, before narrowing down the options it is necessary for the applicants to learn everything about small business financing. Thus to help you gain an insight this comprehensive SME Business Loan Guide will reveal the all essential information.

Here Is a Step-wise Guide to Small Business Loan in India

Before applying for a loan, you need to figure out the exact reason. The reason for which you need to avail finances will drive your choice of loan type. So, take time to ascertain the need for financing. Here are some categories of business loan types:

Line of Credit

The line of credit financing works like a credit card for your small business. Under this credit facility, the financier issues a pool of fund for your business. Depending on the seasonal requirements of your business you can withdraw the funds. And interest would only be levied on the money withdrawn. Soon after you pay back the borrowed amount along with its interest you are again entitled to use those funds. Thus, the line of credit business loan is a viable choice for businesses that have fluctuating capital requirements. 

Merchant cash advance

If part of your business revenue is generated from credit or debit card payments, then a merchant cash advance is the best funding option for your business needs. Based upon the monthly sales volume the lender purchases a part of your credit card sales. Repayments under this funding are made by extracting a proportion of your revenue obtained through credit card sales. Many SMEs find procuring merchant cash advance an easy funding option as under this the repayments can be made on a daily basis without any hassle of hefty monthly EMIs.

Working capital loans

A working capital loan intends to meet the everyday demands of your business. These are short term loans that cover operational needs. These loans can be used for financing offline as well as online businesses. The working capital loans are appropriate solutions for the ventures that face the short term cash flow issues. 

So, this was a quick roundup about the types of business loan offered. Moreover, since the number of females entering the entrepreneurial market is taking a steep surge. We at FlexiLoans support women entrepreneurs as well. We believe that all kind of business owners should get a fair chance to achieve their dreams. Therefore, in order to help the industrious ladies to meet their capital demands, we offer collateral-free business loans for women. Furthermore, the lending landscape discussed below will serve as a guide on small business loans for women entrepreneurs.

What should you consider before applying for a business loan?

Before heading to apply for a small business loan in India you need to consider the following factors. Based on these your lender would evaluate you and your business performance:

Credit Score  

A good personal and business credit score plays an important role in acquiring a business loan. However, a bad credit score will not necessarily rule you out but it can impact the terms of your loan. It can affect the interest rates levied. While contrary to this a good creditworthiness will help you fetch loan faster and sooner.

Cash Flow

Cash flow is one of the focal indicators of your business success. It provides the lender information about your financial capacity of paying back the loan.  The stronger is the business’s income and cash flow are the more easily you are likely to obtain the funding. 

Business plan

Most of the lenders look for an effective business plan to disburse the finances. Your business must present a clear picture about every aspect and should be sufficiently viable to secure funding.

Business Tenure

Getting a business loan is much easier with longer tenure. Based on your experience in business the lender evaluates the consistency of your business. Thus, longer is your track record easier would be the financing.  

Standard Documents needed to apply for a small business loan in India

Applying for a business loan will require you to submit specific information about you and your business. The list of documents that would be required to validate the information about you and your business include:

  • Identity proof
  • Residential address proof
  • PAN cards of the business and other operating personnel
  • Certificate of Incorporation or the Partnership Deed
  • Financial statements of at least the last three years, including Profit & Loss Accounts, Audited Balance Sheets, and Reports.
  • Personal & Business Tax Returns for the last 3 years.
  • Last 6 months bank account statement (business and self)

The takeaway

As a small business owner in India you have ample of options to secure funding, but just don’t go astray. Refer to this small business loan guide to understand what type of loans are right to serve your business purpose well, and what do you need to apply for them. Remember, each kind of loan can provide you cash but only the right choice could take your business to the next level.  

How to apply for a small-business loan

If you are an Indian resident and own a legitimate business which has been in operation for 6 months or more, then you can apply online for small business in as little as a few minutes. 

  1. Fill an online application.
  2. Upload documents. 
  3. Receive a lending decision within 48 hours. 
  4. Get funds credited to your nominated bank account on the following business day.

It’s that simple!

Hope, this guide has accorded you with all of the information needed to acquire the right funding for your small-business venture.

Then, why wait for more log onto  click to apply and get funded!

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