Features Of Business Loan
Applying for a business loan is a big step. Read to know more about the different features of business loan.
Most entrepreneurs or business owners will need instant money for their businesses from time to time, but may find themselves short on cash. Moreover, business loans can become absolutely critical if the operations of an enterprise depend on debt and the owners are unable or unwilling to inject equity capital.
A business loan is essentially the money borrowed by a business or a company from a bank or a non-banking finance company for a predetermined period and rate of interest.
A business loan can be availed for almost any bona fide business activity. It can be used to fund working capital expenses, invest in a new project, buy equipment, pay wages, spend on advertisements or for business expansion.
Unlike a home loan or a vehicle loan, a business loan does not necessarily need collateral or security. Taking a loan is easy and hassle-free, and a business loan can come with attractive interest rates if owners have a good credit score.Here are the main features of a business loan.
With Or Without Collateral:Business loans can be either secured or unsecured. A secured loan requires the borrower to keep an asset such as a residential or commercial property as collateral with the lender. An unsecured loan doesn’t require the borrower to do so. Lenders sanction unsecured loans after looking at the personal credit history of the borrower and the repayment ability or cash flow of the business.
Quick And Online:Most lenders allow borrowers to apply for a business loan online. The process can be completed quickly and with minimal paperwork. The application can be made via a lender’s website or app or even via a loan aggregator. All the necessary documentation can be uploaded and submitted for verification online.
Fast Processing:Once the documents are submitted, the lender will scrutinize them and approve the loan at the earliest possible. Many private banks and NBFCs even approve small-ticket loans within 48-72 hours.
Loan Amount:The amount depends on the credit history of the borrower, the repayment capacity, and the value of the collateral, if any. Unsecured loans are typically smaller, up to Rs 50 lakh, while secured loans can be larger.
Flexible Repayment Plan:Many lenders allow a borrower to repay the loan as per a schedule that may be best suited to the cash flow situation of their business. This makes a business loan extremely attractive.
Fixed Interest Rate:A business loan typically comes with a fixed rate of interest that does not change throughout the tenure of the loan. The interest rate depends on the borrower’s credit history, the amount and the tenor.
An uncollateralized business loan is an easy way of meeting the immediate financial needs of a growing business, when it is short on cash. However, if a business requires a large amount, a collateral might be necessary.
What helps in getting an attractive rate of interest is a good credit score and good business practices. What also helps is approaching a reputed lender that uses well-laid-out processes that make getting the loan and then repaying it convenient.