When you decide to take an online loan, there are a few things you should remember:
1. Assess your business requirements
Evaluate the business requirements first on the basis of the exact need for a loan, the amount of loan that is needed, reasons or proof to support your requirements, etc. Be clear on why the loan is required, for buying equipment or machinery, for business expansion, for working capital, etc. Mention this to the lender and also specify you would be able to repay the same.
2. Know about your credits
All of the lending institutions/lenders would enquire to know about your credit score after they have received the application. Your credit score and credit history can tell about the loans taken in the oast, the repayment history, criminal records (if any), defaults (if any), current debts, etc. CIBIL is the most common which is referred by the lenders but a few also have their own credit evaluation system.
Every business owner should know about the payment history, amount owed, new credits, types of credits in use, etc. Apart from this maintaining the credit report is also very important in the time interval of 6 months. And any errors found should also be corrected immediately.
3. Focus on the basics of the business
Lenders would require the financial statements of the business to evaluate how financially stable the business is. Specifying how the loan amount would be utilized with explanation will convince the lender that your business is stable and is growing.
An important thing here is the cash flow. Maintaining proper cash flow is important as poor cash flow can appear as a problem to the lender in terms of the repayment ability of the borrower/business owner.
4. Conduct research on various lenders and their eligibility
There are many lenders in the market and the eligibility criteria can be different for every lender along with the documents required for the loan. The type of industry the business is in also plays an important role. Some lender prefers established businesses while a few also consider startups or new businesses.
Conducting research on the lenders and understanding their terms and conditions would help the business owner in deciding which lender to go for and also avoid business loan application rejection. Many lenders do not provide online loans or quick loans, so this must be checked. Rejection can have a negative impact on the credit score and can create complications during any future loan applications.
5. Keep all the documents handy
Documents required for a business loan include Aadhaar card, PAN card, ITR of the previous two years, Financials statements of the business like the balance sheet and P&L, business plan, GST receipts, proof that the business premises is on rent, establishment license, etc.
Making sure that these documents are kept ready can save time, and the lender convinced of your application.
Online loans can be beneficial for a small business, here are a few of them:
1. It is much easier to apply for an online loan
The application for an online loan can be done from home or office, as it only requires an internet connection.
The procedure is very simple, one has to visit the site of the lender, upload the documents required by the lender, and then wait for loan approval. There is no need to visit the office of the lender form time-to-time, after the loan approval, the loan amount is disbursed within a few days.
2. They are algorithm-based and there is no other bias
Online loans use algorithms to approve a loan application, check the credit score or the creditworthiness of the applicant.
Factors like the location of the business and any other lender bias is not a part of an online loan. It is purely eligibility based.
3. The loan approval and disbursal is faster
Since the process is algorithm-based, the loan approval may just take a matter of minutes, if everything provided by the applicant is okay.
The verification of the documents is done digitally, therefore, the loan disbursal also takes hardly any time, just a few days.
This helps during the time when the business owner requires an emergency loan or is in need of quick funds for the business.
Nowadays many online business loan applications have also entered the market. But are they really beneficial?
Here are some of the features of an online loan app:
- Less paperwork- A lesser amount of paperwork is required as the applications provide its users with a lot of feasible options to complete the application process.
- CIBIL score calculation & analysis-A role of the application is to categorize loans based on complexity, maintain individual records, keep a report of the credit, and approve or reject a loan requested by the user.
- Managing information- Maintain information like personal history, financial history, security (for a loan), etc.
Some of the benefits of an online business loan app:
- As soon as the loan application is approved, loan money is granted.
- Is time-saving and user-friendly.
- Status of the loan application can be tracked.
- All of the terms of the contract are specified clearly.
- The lender and the borrower or applicant can exchange messages and discuss the requirements.
- Customer care support is available.
If you require quick funds for your small business, for a loan at affordable interest and a quick rate of disbursal 3 days or less to be exact, get in touch with Gromor Finance now!