Answering some key questions in the affirmative before applying for a business loan can ensure the application is approved at the earliest on more favourable terms.
After one works hard and long in putting together a viable business plan, the last element to get the operations going is funding. The first thing that then crosses one’s mind is to take a business loan.
Although there’s nothing wrong with this thought, there are multiple issues involved in taking on debt at the outset. To ensure one’s decision to borrow funds is right, it is necessary to answer five important questions: 1. Is the business loan really required? As mentioned earlier, a business loan has numerous implications. Therefore, consider all angles before opting for it. If there are untapped sources of personal funding, the loan may not be needed. Taking debt when a better option is available won’t make business sense, so probe all funding avenues before going in for a loan. For example, family and friends could lend money on friendly terms or without any interest. Or angel investors may lend on more favourable terms compared to conventional lenders.
If funds are required, depending on the need, one can opt for a term loan or line of credit. The precise amount necessary to maintain the business’ cash flow could also be decided. If these questions are answered, it can ascertain that the debt and its repayment remain within control.
2. What will be the interest rate and the total cost of capital? Awareness about the business loan’s interest rates and the capital cost is essential. A short-term loan attracts higher interest rates, which a new business may be unable to manage. Some lenders quote monthly interest rates, so insist on knowing the annual rate too.
Also, the processing fee and other charges should be clear before availing of the loan to know the exact sum to be repaid and penal charges for late payment, thereby avoiding unpleasant surprises later on. These factors will also help in deciding the lender offering more friendly terms. To get an idea about the interest rate and full amount to be repaid, a business loan calculator is most helpful. If these factors are ignored, borrowers could end up struggling to pay EMIs.
3. How much should one borrow? Determining the amount to borrow will depend on many variables such as the existing funds available, when the money will be used, the estimated annual gross sales and so on. Proper analysis of the funds requirement is vital because lenders will ask questions about these issues before sanctioning a loan.
4. Will there be a bureau-based assessment after the loan application? Whenever one applies for a business loan (or any other type), prospective lenders will assess an applicant’s credit history and creditworthiness through a credit bureau. A cursory inquiry initiated by borrower himself is considered a soft pull and does not affect the credit score. Conversely, a detailed inquiry from one or more lenders gets registered as an inquiry in the bureau records and too many such inquiries can impact a borrower’s credit score and is termed a hard assessment.
Avoid a hard assessment as this can affect the prospects of procuring a business loan – or having one approved on favourable terms – in future. To ensure this, apply only to one lender, where the eligibility criteria are fulfilled. Also, before applying for a business loan, make certain the credit score is healthy to boost the chances of approval. This can be achieved by repaying previous debts and/or ensuring all EMI payments are made on time.
5. How do the credit history and score look like? As highlighted above, the credit score and history could make or break the chances of being granted a business loan. Or receiving the business loan on more favourable terms. Since lenders will check both the personal and business credit history as well as score, loan applicants should ascertain the details before approaching a lender. Personal and business credit history/scores could be checked via a credit bureau. Banks, credit card companies and financial platforms such as Paisa Bazaar and Policy Bazaar also provide free credit history reports. The higher one’s credit score, the greater the chances of the business loan being approved on beneficial terms.
Business Loans with just a few Clicks Now that these questions have been answered, the need for and quantum of the business loan would be apparent. For budding entrepreneurs (and others) who lack the eligibility for a business loan from traditional lenders, Clix Capital is always there to meet their requirements, big or small. These may include working capital needs, expansion plans or more.
As an unsecured credit instrument, business loans could range from INR5 lakh to INR50 lakh. These loans comprise business term loans and working capital loans. The former finances investments for expansion, purchasing tools/machinery and allied requirements. The latter can be availed for diverse purposes such as financing daily business expenses to free up internal accruals for other purposes.
To be eligible, an applicant must be at least 21 years of age while applying and under 65 years when the tenure ends. The business could be a proprietorship, private limited company, closely held non-listed company or partnership firm involved in manufacturing, trading or services with a minimum turnover of INR1 crore. Additionally, audited financial statements should be available for the last two years, with the majority of business routed via the banking system or the turnover of the last one year captured through GST returns. Finally, the entity must be a going concern in its current work area with three years’ minimum total business vintage. If the queries are answered in the affirmative, a business loan from Clix Capital can be easily availed.
The company’s seamless business loan process ensures that once all the details are verified, the credit can be approved within minutes. The repayment terms can be between 12 and 36 months, as per the applicant’s budget and repayment capacity.
The only documents needed are address and identify proof, financial statements, and proof of business ownership. Accordingly, it’s time to make sure that nothing stands between a borrower’s business ambitions and funds requirement – except a few clicks to avail of a Clix Capital business loan.
About Clix Capital Clix Capital is a new age NBFC revolutionizing the lending space by offering differentiated digital lending products that are driven by technology and deep analytics. It offers a range of lending products to a varied spectrum of customers across the MSME and consumer segment, including personal loans, MSME loans, healthcare loans, and mortgage finance.
Clix is co-founded by industry veterans Mr. Pramod Bhasin and Mr. Anil Chawla and is backed by a private equity fund AION Capital Partners Limited (an affiliate of Apollo Global Management, LLC – one of the largest alternate investment managers globally with AUM of $433 billion). Mr. Bhasin is the founder of Genpact and the former CEO of GE Capital India and Asia; and Mr. Chawla has been the former CEO of GE Capital India and Asia’s Commercial Finance Business.
Together Mr. Bhasin, Mr. Chawla and AION jointly acquired the commercial lending and leasing business of GE Capital India in September 2016 and rechristened it Clix Capital.