6 Things to Know Before Applying for Business Finance
According to a recent study, the Indian economy is amidst a major financial crisis with the shrinking of investment by around 3% over the year. Along with that, several factors like the global economic slowdown, reduction in savings, increasing overall expenses, etc. played a role in bringing about this downturn. It is expected that most business owners will find it challenging to run or grow their businesses during such a scenario, typically due to a shortage of finances.
Therefore, the inevitable option here is to go for external funding to fulfil the increasing financing needs. However, availing and managing business finance still requires strategic decisions and extensive research so that you do not end up in a tight liquidity and debt spot. Especially during this economic crisis, one needs to be extra attentive while availing business advances from lenders.
Few things to pay heed to while availing business finance
- Calculate the overall costs of your business loan
While availing funding in a lump sum, you should be aware of all the liabilities and repayment responsibility that come along. This includes the total estimate of the monthly EMIs that you will be paying, along with additional charges such as processing fees.
Also, there should be proper research regarding the terms and conditions associated with your business loan so that you can choose the suitable lender accordingly. Assessing all these details further helps in making the repayment process smooth.
- Keep track of your CIBIL report
For any unsecured loan to be sanctioned, borrowers must meet the eligibility criteria, which also include maintaining a decent credit score of 750 or above. This score helps lenders determine the risk factor associated with the borrower, based on which the loan is approved or rejected.
Further, even after availing a business loan, one needs to pay the EMIs in time and maintain other requirements of that particular loan, which also affects the CIBIL score. Therefore, knowing what effects a CIBIL score can have on your business will help you to avoid such mistakes, ensuring a suitable borrower profile for high-value financing.
- Choose an affordable financing option
Affordability is one of the top concerns of businesses when it comes to borrowing, as the repayment liability must be sufficiently affordable to be repaid in time without any financial strain. Such affordability can be suitably assessed by checking the EMIs payable for your business finance.
You can proceed to make this assessment with the help of an EMI calculator, which will help you determine the EMIs payable for your selected loan amount and repayment tenure.
- Maintain financial statements
Producing necessary financial statements helps a lender to gain a clear idea of your business’s standing and income stability. On the basis of that, the financial institution will assess your repayment capacity and approve the funds accordingly.
When planning to build your business brand with the funding or fulfilling any defined goal with the advance, make sure to include such details in your application as well. It will help a lender assess your plan regarding fund utilisation and revenue generation for a clearer idea, improving your chances of loan approval.
- Check available offers for convenient financing
Since financial institutions bring different offers to make borrowing convenient for businesses, one should be aware of these offers and apply through them for hassle-free financing.
For example, lenders like Bajaj Finserv bring pre-approved offers to make financing simple and quick. These offers are available on several financial products like business loans, personal loans, credit cards, etc. You can check your pre-approved offers by submitting basic details such as name and contact number.
- Plan for repayment before applying
It is equally important to check whether you will be able to pay monthly instalments and repay the loan amount within the tenure conveniently or not. You should create a suitable plan accordingly that includes your estimated business profits that will be directed towards such repayment, and opt for a business loan accordingly. It will lend confidence to the financier regarding your repayment ability.
With several offers on business loans from top NBFCs, obtaining a suitable funding option is not challenging, especially by keeping all these tips in mind. Managing business finance, nevertheless, requires suitable strategies for business growth so that you can eventually pay off your debts without any strain.