Starting a business is no mean feat, no matter what age or time you start it at. Business enthusiasts go through a lot of dejection and negativity while applying for a business loan. It also happens with new-age entrepreneurs. It’s sad that even promising small businesses don’t succeed and crumble within the first year or two because of financial hurdles.
Here in this article, we explain some of the challenges the borrowers can face when taking a business loan –
Lengthy process time
Banks take months to approve business loans. When we speak of conventional lenders, they consider an extended time period to say yes to a business loan. This can be very demotivating for businessmen who intend to have instant capital to boost their product’s initial prep work. Not just that, seeking a high business loan has its own problems.
This can be solved by taking an appropriate business loan which suffices your requirements with flexible repayment options via many non-banking financial companies.
Need for collateral
Businessmen, in many cases, fall short of or don’t have any valuable collateral to give to lenders. Again a huge challenge in securing a business loan! Lending institutions also don’t show much interest to give loans to borrowers who have received capital from other sources in the past.
Low credit score
A low credit score can hinder your efforts of seeking a business loan. And ironically, having no credit history makes the process even more difficult. Yes, basically to acquire a loan, you need a credit score and for a CIBIL score, you need a loan in the first place!
Maintaining Cash Flow
Regardless of the profits your business generates, the borrowers should have sufficient funds for a few months to run their businesses. For that, pre-planning is imperative!
Weak Business Plan
For a fact, many businessmen lack a promising business plan which will yield profits. The deciding factors can be the model type, competitors, strategy, scalability, marketing etc. Financial institutions ask for a copy of the business plan to decide your loan repaying ability.
Lastly, even if you overcome the aforementioned obstacles, it is improper documentation that can be the deal-breaker! Financial institutions expect a certain protocol from their borrowers, like the number of signatures, right documents, properly filled forms etc. This comes in the way of someone, say who is an auto-rickshaw driver, or a cottage industry person who isn’t really financially literate. Hence, the approachability factor comes into play.
How about sharing your loan-related experiences with us? Write down in the comments section below about the challenges you faced while applying for a business loan and the ways with which you overcame them.