What Factors Should You Focus On While Comparing Small Business Loans?

Being a small business owner is one of the best feelings in the world. Having left the confines of a job and finally getting to do the things the way you like is exciting for anybody. You are no longer answerable to anyone and are finally your own master.

This feeling of having the entire profits for yourself is what keeps you motivated to work hard and put in extra hours without ever feeling tired. But you know all too well that the picture is not as rosy as it seems.

With great power comes greater responsibility, you can no longer pass the buck to your subordinates or colleagues for something not being done right.

You are responsible for everything you or your employees do and have to bear the consequences of it as well. Additionally, it is your responsibility to ensure adequate liquidity in the business, so that the operations can keep on running smoothly.

Whenever you face a liquidity crunch, for whatever reason it may be, it is up to you to arrange funds and keep things moving. Otherwise, you might lose your competitive advantage over your competitors.

In such a situation when your payments have been delayed or there are some urgent expenses coming up, availing a collateral free business loan is what you need.

This facility is offered by many financial institutions in India for business owners, where they get access to a certain amount for their business-related requirements and can repay the business loan it in easy monthly EMIs, without stressing the finances.

Advantages of Collateral-free Business Loan

If you are comprehending availing an unsecured business loan but are not able to make up your mind, then read more the following advantages will certainly change your mind.

No Collateral: There is no need to offer a collateral for an unsecured business loan in India, making it ideal for meeting urgent requirements without much documentation.
Extended Repayment Tenor: Collateral free business loans have a repayment tenor of up to 24 months, which assures that the EMIs stay within manageable levels for you.
Flexibility: You are free to use the business loan amount for any business-related requirement that you may have. Moreover, there is no need to inform the lender regarding the final usage of the money.
High Value Loans: The maximum amount available as unsecured loans can go beyond Rs. 5 Lakhs, depending on your credit profile. This makes them ideal for a variety of situations.
Quick processing: When applied online, business loan applications are processed on a priority In most cases, the process is completed within a few working days.

Factors to Consider While Comparing Business Loans

With the rapid integration of technology in the financial services sector, you can now easily compare different types of business loans.

But it is very important to know about the factors that you must focus on while comparing loan to make sure that you select only the best small business loan for yourself. Here are the most important factors that you need to consider.

APR: APR stands for Annual Percentage Rate which means the annual cost of a loan. This is a much accurate measure of the cost of a loan as compared to business loan interest rates. Sometimes a particular lender with a higher interest rate might have lower APR compared to one having a lower interest rate but higher APR. You must choose the one with lower APR as it would reduce your annual payments towards the loan account.
Terms and Conditions: Always make it a point to read through the fine print of the loan agreement before signing on the dotted line. If you find any doubtful points, make sure that you seek clarification for the same.
Foreclosure Charges: Usually, you would try to foreclose the business loan as soon as you can because it would save you a lot of money on the interest cost. So, pay close attention to the foreclosure charges being levied by the respective lender and remember to negotiate hard to reduce them. There are some NBFCs that levy no foreclosure penalties.
Repayment Tenor: You must choose the repayment tenor according to the EMIs you can pay. Your motive should be to repay the loan at the earliest. Make sure that you choose the shortest repayment tenor possible.
Credit Score Requirements: If you have your CIBIL score with you, then you must compare it with the business loan eligibility criterion specified by the respective lender. Proceed ahead with the application only if your credit score meets their threshold.

Availing a business loan is a big financial responsibility. So make sure that you exercise due diligence before you finalise a business loan product for your business.