Whether you start a new business or running an existing business, a need of finance arises at every stage of business. Funds are required for purchasing machinery, inventories, for paying salary to staffs etc.
If you are facing any financial crunch then a business loan is the best option which rescues. Business loans are the loan which is usually availed for financing diverse business needs such as expansion, purchase of inventory etc.
Generally, there are two types of business loans such as secured and unsecured business loan. In the secured business loan, you need to mortgage your property or any other collateral whereas unsecured loans are the collateral free loan which makes an unsecured business loan more favorable among borrowers.
Choosing the right business loan is very important as it helps them in drawing out the full benefits of a loan. There are some points to look for when applying for a business loan online.
Public Sector Banks take more time in comparison to private lenders to process a loan application but there are multiple benefits of taking a loan from them. In case of urgency, you should go for the private lender though they charge a bit high rate of interest but process the loan application very fast.
The rate of interest of unsecured loan is a bit higher as compared to secured loan but unsecured business loan are very beneficial if you don’t have any property or asset to mortgage to the bank. So, go for the lender who provides a collateral free loan.
You should go for the lender who has fewer eligibility criteria and minimal paperwork. Apart from eligibility, you should also check out the terms and conditions such as interest rate, repayment schedule, EMI facility, loan ticket size, processing fee, hidden cost, etc before applying for any loan.
Flexibility in repayments
You should go for the lender who offers flexibility in repayment system schedule so that when you have surplus funds you can prepay the loan amount. One more thing you must check that the lender charges less or nil pre-closure or foreclosure fee.
Mode of disbursal
Generally, the business loan has two modes of disbursal. One is an installment loan and another one is a line of credit. In the installment loan, the lender disburses the whole amount at once and a line of credit is revolving credit. In a line of credit, a certain limit is fixed by lender up to which you can withdraw the loan amount.
The important benefit of getting a line of credit is you have to pay interest only on the loan amount you withdraw or utilize. The mode of disbursal preference depends on the need of money. If you want amount in bulk you can opt for an installment loan but if you want the money in smaller parts, you should better opt for a line of credit. So, before finalizing your business loan, you must ask your lender about the mode of disbursal of the loan.
It is very crucial to choose the best lender and above these are some important points you should keep in mind before applying for a business loan.
Choosing the right lender is very important for drawing full benefits of Business Loan. You should go for a private lender as they take less time in processing. You should choose the lender who has fewer eligibility criteria and less paperwork. Before applying for a loan, ask your lender about the mode of disbursal.
There are two types of disbursal method available in the market, one is the installment method and another one is a line of credit. In the installment method, you will get the whole amount in bulk. Furthermore, in a line of credit, a certain limit is fixed by lender up to which you can withdraw the loan amount. So, compare all options and choose accordingly.