Running a business without funding from an external source is quite a challenge. A business loan can be handy when you’re starting a business or scaling one. Even if you are purchasing a business property or trying to sustain your current business operations, business loans are beneficial. As a result, SMEs need to have long-term funding plans to plug any potential rainy days. To do this, you need to be certain that your applications for business loans remain optimal. The application process is a key stage in acquiring your business loan, and in this piece, you can find out all you need to know about it.
The Jargon of Loans
If you’re not used to loan jargon, the language used in documents for loan applications can be confusing. Here are some important terms to note:
EIR or Effective Interest Rates –
An all-inclusive rate that you will finally pay for in your loan is the EIR. It includes processing fees and a principal amount, which decreases progressively. While selecting a loan, it’s a good idea to check the EIR and not just the flat business loan interest rate.
Guarantors and Collateral –
Guarantors are legally responsible for the loan if the applicant cannot fulfill loan obligations. Unsecured loans are not backed up by collateral, constituting assets like fixed deposits, property, etc.
Prepayment and Lock-in Periods –
Banks lock in their own funding costs, so prepaying a loan causes you to pay the penalty.
Funds for Day-to-day Operations –
Working capital, or funds for daily operations, is required to run a business proficiently. Some business loans are used mainly to meet the needs of working capital.
When the principal of your loan is progressively paid off, loans are said to be amortized. A schedule of amortizations shows repayment amounts to be paid as monthly installments.
You are allowed to defer (postpone) loan repayments for a pre-planned time. This is called a moratorium. For instance, during the recent lockdown, to help small SMEs, banks have permitted borrowers to defer the principal amount of repayment.
Features, Benefits, and Types of Business Loans
If you go through Finserv MARKETS, it’s easy to get a business loan upto Rs.35 Lakhs. Unsecured loans, you can use funds for enhancing infrastructure, buying raw material, hiring employees, and any payment to do with your business. According to your needs, you can apply for a business loan for the following businesses:
- Start-up Business Loan – This is a business loan for start-ups.
- Women’s Business Loan – Business loans for women aim to promote independence, and these come with a good business loan interest rate.
- Business Loan for MSME – Micro, Small, and Medium Enterprises can get loans for improving infrastructure, buying machinery, or expanding business.
- Working Capital Loan – This is given to managing daily operations of businesses, like keeping up a steady cash flow and short-term debt consolidation.
- Equipment Loan – This loan is given for revamping machinery, buying new tools and equipment, etc.
How to Apply for a Business Loan
- Go to the Business Loan section and fill an application form.
- Select your business loan from a choice of lending partners.
- Choose the loan amount needed and the repayment tenure.
- Submit your application. After approval and verification, the amount will be disbursed to your bank.
Getting a business loan is simple, with a head to start from Finserv MARKETS, where you learn about eligibility, application, and the like.