5 important points to note while you avail a business loan for your enterprise
A business loan satisfies your fund requirement to expand or build a business. However, before applying for a business loan, there are several points to consider and analyse to ensure that you choose the best plan that suits your loan requirement. In this article, let’s discuss the top five important points to note while you are planning to apply for a business loan.
Be clear on your fund requirement
First of all, determine the financial needs of your business. Have a clear idea of how much money you need and how you are planning to use it. Create a detailed business plan, analyse all your fund requirements, and estimate whether your business revenue will be capable of repaying the loan properly as per the scheduled time.
Choosing the right type of loan
Now that you have a clear picture of your business requirements, next, you have to select the right type of loan. Business loans help you to grow your business and take it to the next level. Compare the interest rates from the lenders available in the market to choose the best suitable loan plan for your business. Check for interest rates, repayment terms, flexible loan tenure and if any additional hidden charges applicable.
Your Credit Score
Credit score is the most important factor that makes you eligible for a business loan. Lenders always check your credit score while processing your loan application. Be it NBFCs or banks, credit score serves as a mandatory check point to approve your loan application. Maintain a healthy credit score by repaying your on-going loans and credit card payments on time. If your credit score is low, you will be in a situation where you will be asked to pay higher interest rates. So, it is very important that you should work on improving your credit score before applying for a business loan.
Get your documents ready
It is mandatory to provide supporting documents to process your loan application. Some of the documents include registration documents, financial statements, tax returns and bank statements. Ensure that you have all the mandatory documents specified by the lender you have chosen.
Have a proper plan for Repayment
Most borrowers fail to have a proper repayment plan before applying for a business loan. This is a serious thing where you need to put in more focus. You should have a perfect plan to make repayments of your loan EMIs and ensure that you repay on time every month. This may also affect your eligibility of the loans you may apply in the future. Calculate your monthly payments in advance to make sure that your monthly EMI fits within your monthly budget.
Proper financial planning is required before you apply for a business loan to ensure tension-free loan repayment. You should also consider the loan tenure, late payment fees, repayment options and foreclosure options while you opt for a loan. This will help you in repaying your loan without any penalty fees.
Cholamandalam offers business loans with minimal documentation. Check out Chola Secured Business Loans before choosing your lender.