Startup Business Loans - Expert Advice
Business loan can be useful for a business to meet their financial requirement. Want an expert advice for startup business loan. Read Now.
The term startup is used for a company which is in the initial stages of operations. These companies generally start with high costs and limited revenue, which is why they often look for a loan.
Most financial institutions offer business loans to startups. There are various types of secured and unsecured business loans. Lenders also offer loans under various government schemes such as Bank Credit Facilitation Scheme, Pradhan Mantri Mudra Yojana, Credit Guarantee Scheme, Standup India, Sustainable Finance Scheme, and Psbloansin59minutes.com.
However, availing of a business loan to fund a startup is easier said than done.
How To Address Challenges In Securing Business LoansThere are various ways by which an entrepreneur can maximise his or her chances of securing a business loan.
Strong Business Plan:The feasibility of the borrower’s ideas must convince the lender. So, the borrower must keep ready a comprehensive business plan with all essential elements like competitor analysis, marketing strategies, operating plan, financial analysis, management team, and product description.
Financial History:Startups don’t have a business history, and thus it’s difficult for lenders to assess their credibility. Therefore, they conduct an extensive background check on the startup’s founders to ensure the applicants can repay the loan. Hence, the applicants should ensure they have a clean and strong financial history to maximize chances of loan approvals.
Keep Credit Score High:A high credit score assures banks and non-banking finance companies of the borrower’s repayment potential. A good credit history will help in getting the loan easily with better terms and interest rates. A score of 700 and above is usually considered good enough. A score below this may subject the applicant to further scrutiny and possibly higher interest rates.
Collateral:Even though not all startup business loans require collateral, chances of the loan application getting approved at affordable rates increase if there are collaterals involved. Lenders offering secured loans may require the borrower to list security assets like vehicles, business equipment, house, or land.
Large Debt or Low Income:Startups are overburdened by expenses and may not have a steady income. But they must have a strategy in place to convince lenders that they have the capacity to repay their loans.
Documentation:Sometimes, it is a hassle to obtain multiple important documents, and as a result, the entire application process gets delayed. Hence, a borrower must work ahead of time and keep all the documents ready.
Interest Rate:The interest rate on business loan varies from lender to lender. The borrower should make use of online tools to compare interest rates of various lenders.
Before applying for a startup business loan, an entrepreneur should do a thorough analysis of the available options and eligibility requirements. A lender would not want to approve a loan unless the applicants prove their repayment ability.
The process of applying for a business loan can reach into nearly every corner of an applicant’s financial history. Therefore, the applicant must keep ready all the documents, updated business plans and information on collaterals in case of secured loans to avoid the stress of last-minute scrambling.
Hence, while applying for the loan, the borrower should have a solid business plan, elaborating on the financial outcome for the future. A steady and profitable business has a high chance of getting a loan approved, that too at lower interest rates, than a business that is not making a profit.
Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.