Today, business owners have more options to raise funds than they have in the past. There are countless financial institutions in the market that offer low-interest business loans. Yet finding the right lender or negotiating the finest financing terms for your business can be tricky.
You must prepare a questionnaire for yourself and your lender before applying for this loan.
Questions That You Must Ask to Yourself
Q.1. Why do I need this Loan?
Your purpose for obtaining funds is important. You need to identify why you require funds. If you merely need a few thousand rupees, your company’s revenue can assist you in that. However, if you require funds for making capital expenditures or for stock replenishment, business financing is the ideal option.
Q.2. How much money do I require?
You need to be clear on this before exploring the options on the market. The minimum and the maximum loan amount vary with each lender. In addition, the loan amount also helps you determine whether or not you are eligible for the loan. If you qualify, the next step is to calculate the affordability. You must check how much of the EMI burden you can shoulder.
Q.3. What kind of business loan should I apply for?
Business loan are available in different forms, or better say, in a customised form. The loans for business are available under the name of term loans, working capital loans, equipment financing, and a few more. If you own a hospital or clinic and need money to buy a high-priced CT scanner, consider applying for a medical equipment loan. The longer loan term ensures that you will be able to pay your debts without any problem. Similarly, apply for a business term loan if you need a short-term loan to address short-term business obligations. This type of loan can be taken out for a maximum of 36 months.
Q.4. What does my credit profile suggest?
It’s vital to keep track of your credit report. The lender takes into account both your personal and business creditworthiness. A strong credit score guarantees approval to some extent. You are probably wondering why the lender cares about your personal credit history. The reason is that it aids the lender in determining the degree of repayment discipline possessed by the business owner.
Simply put, you must have a good personal credit record in addition to flawless business credibility.
Questions That You Must Ask a Lender:
Q.1. Do you provide financing to firms in my industry?
Many financial institutions focus on a specific industry. You may also say that the lenders have a list of sectors with which they avoid making lender-borrower relationships. Even if you have a good credit history, a lender will not lend to you. As such, raising this query early will not just save your time but will also help you to quickly find another lender that can help you with quick funds.
Financial institutions will not lend to a profile with a trade relationship with an enemy country.
Q.2. What is the business loan interest rate, and how much will it cost me in total?
There are several methods for comparing lenders. You can visit DSA in person or go to several lenders’ branches, but it will be a lengthy process. As a result, it is preferable to use an online method. Visit any of the business loan aggregator websites to begin comparing the business loan interest rate.
Aside from the interest, you should look into the additional charges involved with this loan. Check the processing fees, rescheduling charges, late penalties, and so on.
Q.3. When do I have to pay my EMI?
When it comes to EMI due dates, it’s fair to assume that you will have to pay them in the first week of each month. However, what if your due date arrives before your creditors have made any payments to your account? What will you do then?
You will be able to set the EMI due date according to your convenience if you ask this query before completing the loan formalities.
Q.6. How long will it take to process my business loan application?
The application processing time and the disbursal time vary with each financial institution. If you apply with a traditional lender who has yet to integrate technology into its lending process, you should expect a few weeks or perhaps months for approval. You will need to keep track of your own application.
However, if you apply with a modern-day lender, you will receive loan approval in minutes. And the funds will be credited to your account within two days.
To sum it up:
Obtaining answers to the preceding question can help you better grasp your company’s requirements. It will also assist you in decoding your business loan eligibility based on your profile.