When you are running your own business, there is one thing that you get to know first-hand and that is to keep your business operations running is your responsibility. No matter how capable your employees are, the entire responsibility of ensuring the business growth is yours. You have to take care of all the operations that are performed along with your regular duties as the owner. It might involve you traveling great distances or regularly conducting new meetings to promote your products and services. One thing that you will get to know first-hand is that the payments never come as per your desire. Your payments from customers might be delayed due to any reason but you cannot press them too much for payments as you might then risk losing out your customers to the competitors. Also, you have to take care of your day to day expenses as well as monthly bills.
So, from where can you arrange the money to make sure that you are able to honour your liabilities in a timely manner? Your personal savings might have been exhausted just getting the business started, now what is your option? Borrowing money from relatives or friends might not also help you out and what if they are also unable to offer you the required money. It is, thus, important to access a reliable source for your business loan funding requirements. The best option at your disposal is to take an unsecured business loan from any of the financial institutions operating in India. There are several financial institutions, like banks, NBFCs, and online lending companies that offer this facility for small business owners.
Due to the ease of application and various other benefits, online lending companies have emerged as the preferred borrowing option for small business owners.
About Online Lending Companies
Online lending companies are specialised NBFCs who conduct their operations through online channels only. Usually, these companies have their website and mobile App which help the business with an easy answer to their question “how to apply for MSME loan.” You just need to log-on to their website or mobile App and apply using the online business loan application module which requires you to upload the PDFs of your financial and KYC documents to process your application. With the efficient system these companies have in place, it only takes a few working days to take a decision on the business loan application. The amount is also directly credited to your bank account. These online lending companies follow a transparent working style, wherein they keep you informed about the status of your application through SMS or Email.
Some of the salient features of business loan funding provided by online lending companies are:
- Unsecured business loans of up to Rs. 5 Lakhs for businesses with annual turnover of more than Rs. 10 Lakhs.
- Flexible rate of interest starting from 23% and going up to 28%.
- Flexible repayment tenor of up to 24 months to repay the loan amount.
- No penal charges on foreclosure of the loan account.
Factors that determine your Business Loan Eligibility
In the wake of rapid integration of technology in the financial services sector, most financial institutions have now started following a stringent screening criterion to assess any application for a business loan. It is thus important for you to know about the various factors that play an important role in determining your eligibility for a business loan funding. Here are the major factors that determine your business loan eligibility:
- CIBIL Score: Your CIBIL score must be above 700 to enhance the chances of your application being approved quickly. TransUnion CIBIL rates a number of factors to determine your credit score. You must therefore keep a close watch on your CIBIL score and if it is below 700, you need to work towards improving it.
- Cash Flow: Lenders assess your repayment capacity based on your cash flow cycle. So, you must make sure that your payments are realised on time as wellas there must be significant cash sales to show the liquid health of your business.
- Credit Utilisation Ratio: Lenders considerup to 40% of your income for repayment of loans. So, make sure that you do not avail too many loans because it will reduce your eligibility significantly.
- Age of your Business: The older your business is higher would be your eligibility for a business loan because it reflects stability of your finances.
- Income Level and Turnover: In the end, it boils down to your turnover and your profits because these two significantly impact your repayment capacity.
It is therefore important for you to consider your credit profile against these factors to determine your business loan eligibility and apply only if your eligibility amount is higher than your requirement.