Today, small business loans are available to the vast masses of the country from a large number of traditional and digital lenders. Business loans can help any business in expanding its reach, territories, and enhance marketing efforts - allowing it to hire new people and reach potential success. It’s true that businesses in today’s day and age require funding at many phases in their operations - whether for financing equipment or recovering from losses. Acquiring business loans can help entrepreneurs in financing several aspects of their businesses in a smooth way.
Here are 6 important things to know before applying for business loans.
- Loan Amount
One of the first things that you’ll be required to present is the loan amount you’re hoping to avail. This amount generally varies from lender to lender. Banks usually have the most access to capital and issue loans of six or seven figures - depending on the individual’s eligibility. If you need access to a smaller amount, banks are not always the best route. This is where modern NBFCs come into play. One such digital NBFC is Clix Capital that provides hassle-free loans, which are easy to apply.
- Credit Score
The borrower’s credit score reflects their ability to handle their personal finances and expenses. Lenders particularly take a look at this score to determine if the borrower’s repayment capacity is appropriate and if they can make timely payments. Ideally, the credit score should be 750 and above. Such cases have the maximum chance to get customised interest rates and flexible repayment plans since the financier trusts them. Hence, an individual’s credit score not only determines if the lender will approve their loan but also determines their interest rate.
- Business Duration
Every financier will ask how long the borrower has been operating their business. The longer one has stayed in business, the better it is as this shows the financier that the business has had long-term success. It’s not impossible for businesses under two years to avail a loan, but it does limit the options. Some banks would only lend to businesses having a duration of more than two years - but this is not the case with modern NBFCs.
- Business Plan
Financiers like to see if you have thought about potential opportunities and challenges for your business and if there is a success plan laid down. Your business plan serves as an opportunity to lay out your financial goals and your qualitative business goals.
- Licenses and Permits
Not all, but many states and localities require small businesses to avail permits and licenses before they can start operating. Requirements depend on the industry and state that your business operates in. It is advisable to have a proof of ownership and license - just in case the lender asks for it.
- Proof of Collateral
Collateral is a particular asset of the borrower that the financier has access to till the loan amount is fully recovered from the borrower. In case of major defaults and failure to make payments, the lender can use this property to recover the losses. While business loans can be taken without collateral too, some lenders can ask for it to provide the loan amount.
Wondering how to apply for business loans online? Click here and avail hassle-free loans by modern NBFC Clix Capital.