Indians are known for their entrepreneurial spirit, but converting an idea into reality requires capital. Capital is the factor that decides if a business will remain a small unit or will be able to scale up. Though micro, small and medium enterprises contribute significantly to the country’s GDP, upward mobility is required to improve efficiency. There are around 36 million MSMEs in the country, which contribute 29% to the GDP and employs over 11 crore people. Easy availability of business loan can boost MSME numbers and increase their output, generating much-needed employment. Though business loans can be easily availed, many people don’t opt for it due to various preconceived notions. Here are 6 business loan myths that shouldn’t be believing.
Getting a small business loan is difficult
Every lender has its own risk assessment system for providing credit to small businesses. If you are well prepared for the application process, your loan is more likely to be approved. If the financial records of the company are transparent and the loan is required for genuine purposes, lenders seldom decline a small business loan. The entry of NBFCs has made it easier to get a small business loan as they are more inclined towards the needs of small businesses. Business Loans, available on Finserv Markets, get approved within 24 hours and can be applied with just two documents.
Higher Credit is required for a business loan
A good credit score is very important, have no doubt about it. But a perfect credit score is not a prerequisite for getting a business loan. A person with a good credit score will receive the loan at a lower cost than a person with low creditworthiness. Banks have a relatively strict with creditworthiness requirements, however, they are not the only source of funds. Alternative lenders provide a great level of flexibility in terms and conditions, including the level of creditworthiness.
Interest is the most important factor
It easy to obsess over the rate of interest but the interest rate is not the only factor that should be taken into consideration before applying for a small business loan. Though the interest rate decides the final cost of the credit, other expenses such as processing fees, early repayment penalty, account maintenance fee and banking fees should also be kept in mind. The maximum tenure of the loan and payment terms are also important factors to consider. At Finserv Markets, you can apply for a Business Loan, which provides a lot of flexibility, including prepayment with zero charges.
Loan Approval takes a long time
Time is of the utmost importance for a small business. Many business owners presume that it takes a very long time to get a business loan approved. The approval time depends largely on the preparedness of the applicant. If a business owner meets all eligibility criteria and has his/her documents in order, the loan gets approved in a very short time. Some lenders also offer loans that are processed in just 24 hours. However, banks have to carry out credit checks, and it takes time, which is unavoidable.
Collateral is mandatory
One of the most popular myths is that you have to pledge assets to receive a business loan. Not every lender requires you to pledge collateral for business financing. Both secured and unsecured loans are available, but a secured business loan is more likely to be cheaper. Moreover, in most cases, lenders ask for a personal guarantee for approving a business loan without security.
Requests for large amounts get rejected
The approval of a business loan is not dependent on the quantum of the loan sought. Lenders take into account factors like the creditworthiness of the borrower, the quality of the business and the reason for the loan. Approving a large amount for the right borrower is more lucrative for lenders in the long run. You should seek the amount that can be easily serviced every month. A small business, anyways, doesn’t require a very large amount and lenders easily finance business loans for eligible borrowers.
If you are a small business owner and require capital, it is better to get in touch with credible lenders. Alternative lenders provide tailor-made loans for small businesses with features like pre-approved business loans, improved flexibility and quick processing. Business Loan can be utilized for a variety of purposes ranging from the renovation of the office to machinery repair. At Finserv Markets, you can check your eligibility, calculate monthly instalments and apply instantly for a small business loan.
Read more on benefits of business loan.
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