Whether it is starting a business or expanding an existing one, a business loan is indispensable. Even if you have enough capital at your disposal, it never makes sense to invest the entire amount on your business. Business loans allow you to spread the risk over 1-5 years and gradually pay in easy EMIs as your business grows. What if you are an existing business that has received a huge order but don’t have enough capital to fulfill it? You can use the business loan as your working capital and meet the clients’ order, then repay the amount to the bank after you receive payment.
So, you already know why you need a business loan. After helping millions of individuals to obtain a Bajaj Finserv business loan, Finserv MARKETS suggests that you ask these important questions before you apply for a business loan.
1.How much cash do I really need?
Proper calculation and financial need assessment are important to avoid under or overestimation. Some experts suggest that the best approach is to create a monthly cash-flow estimate. Include all the costs involved in the business such as equipment, rent, power costs, payroll, advertising, marketing, etc. Your calculation should also consider the difference between the time taken to receive payments from customers and the time allowed to you by your vendors to make payments. For instance, if your customers are paying you within 45 days but you may have to pay your vendors within 15 days, you need enough money to go through that 30-day gap.
The risk with overestimation is that you will end up paying more interest with excess cash in your hand that you probably do not require. On the other hand, if you apply for a loan amount that is lesser than what you need, you run the risk of jeopardising your business. Know how much you need before you approach the bank.
2.Can I generate the cash flow to repay the loan?
Do not be too optimistic when you answer this question. Your optimism could be your naivety. No, there is nothing wrong in being optimistic but your lender will not approve the loan based on how positive you feel about your business. You must have a solid financial projection and proper debt repayment plan in place for your business to add credibility to your loan application. Lenders consider a healthy monthly cash flow as one that is three times your EMI. Don’t create a projection that has little room for error, it will only scare your lenders.
We suggest you use the Bajaj Finserv business loan EMI calculator at Finserv MARKETS to get an accurate understanding of your EMI outflow and compare that with your monthly cash flow to assess your business’ repayment capacity.
3.Is my financial health in order?
If you have made a habit of maintaining a healthy personal credit score, more often than not it reflects on your business credit score. Make sure that your debt to income ratio and cash flows are in order and you have been religious about filing your tax returns every year. If you have a good business credit score, bankers will prefer offering loans to your business at attractive interest rates.
Finserv MARKETS helps businesses take advantage of attractive Bajaj Finserv business loan that come with flexible repayment tenures and access to your personalized Financial Fitness Report.
4.What is my best financing option?
The financial sector gives you a plethora of choices to select the best financing vehicle for your business loan. From personal loan, loan against property, gold loan, working capital loan, credit cards, government loans, start-up loans, or even funding from investors if you have a good business idea and plan. Some may even lean back on family, friends or wealthy relatives to finance or expand their business.
No matter which financing vehicle you decide to use, take a good look at the terms and conditions. Decide whether a fixed or floating interest rate works for you. If you want to buy an equipment, check what is the loan to value. It ranges from 60-90% depending on the financial institution, your business’ creditworthiness, and whether you are buying new or used equipment. Check the processing fees, repayment charges, flexibility and other clauses carefully before you sign below the dotted line.
Online application, flexible repayment options, and minimal documentation are some of the other key benefits of availing a business loan from Finserv MARKETS . All these features and benefits provide Finserv MARKETS an edge over other financial institutions in the market. Now that you are aware of all the important things that you must consider before applying for a business loan, you must make the right choice and settle for a loan that best suits your needs.
Also, read about SME loan meaning and its benefits.
Finserv MARKETS , from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!