While many banks and financial institutions offer business loans today, a question always looms in the back of the mind of the borrower- what is the best way of getting approved and how to increase the chances of securing the loan. Moreover, there are other questions to think about like whether there is some other good deal that he is missing out on. What if there was a lender who was offering lower interest rates than the lender he finally chose to go with? A business loan is, of course, a necessity for those desirous of spurring further growth of their enterprises.
Securing a Business Loan
To start with, it is important to have two things in place to secure a loan- a good credit score and a good repayment plan. This is what the creditor will consider at the very beginning as well. The higher the credit score, the better are the chances that the creditor will consider you a safe option. Moreover, after submitting all the papers, if the creditors are happy with the IT returns and the balance sheet of your company in the last three years, the loan would get approved within two days.
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While considering the repayment plan, hence, research creditors with the low business loan interest rate so that it makes your EMIs lower and repayments easier. The interest rates can differ vastly from one bank to another and this is where the lies the importance of proper research to find the right business loan. It is imperative that one thoroughly researches the interest rates among the various lenders to understand how much one would have to pay towards the monthly EMIs. Some lenders have an interest-free period in the beginning but the interest rates are quite high once they start charging, and in some cases, the processing fees of one lender is higher than another’s. However, try not to fall in for scam companies who lure people with promises of low interest.
In case of small business loans, the APR or the Annual Percentage Rate is a huge factor. Unlike only the interest rates, the APR takes into account the gamut of expenses that one would have to bear during the loan application period. It includes the full cost of taking out the loan, including the processing fees and the arrangement fees. So while considering your repayment ask for this rate, and plan accordingly.
Which brings is to the next aspect, the Factor Rate. This is neither the APR or the interest rate but a sum total of interests, fees and everything else that would come into the picture when you pay your EMI. Every payment would carry the principal and interest and the borrower will come to know how much has been repaid. Asking for this beforehand will not only help you plan your repayment better but will also make the creditor believe how serious you are about repayment and will expedite the loan approval.
Always factor in the time that you are spending repaying the loan to increase chances of business loan eligibility. While in some cases, you might feel that you are spending a lot more towards EMIs, it might also mean that your loan would get repaid faster. Lesser EMIs mean you have a lesser burden to bear and also a longer tenure of repayment, but if you do a comparative analysis, you end up paying a lot more in the long run. This is up to the borrower that whether he chooses to save cost in the long run and pay off the loan as quickly as possible with hefty EMIs. The business loan is not very hard to manage and if there is a good lender like Bajaj Finserv.