5 Important Things To Consider Before You Apply For A Small Business Loan
Running a small business is not an easy task. Given the present situation of a pandemic, there are several challenges faced by small business owners across the country. While the Government has made all the attempts to help small businesses, there are lenders across the country that offer a business loan. So, if you are in need of funds, consider a loan but before that, here are a few things you need to keep in mind.
- Purpose- Before you apply for a loan, you need to identify the purpose to borrow. You need to be aware of where you intend to use the funds and the amount you require. Consider the purpose first and then estimate the funds you will need. When you are clear about where you intend to use the funds, the chances of loan approval are high.
- Processing fees- The processing fee is the amount charged by the lender for the purpose of processing the loan. This amount will vary from one lender to another and it is usually a percentage of the loan amount. It is not a hidden charge and will be informed to you at the time of the loan application. However, processing fees can increase the overall cost of borrowing and you need to consider them at the time of application. Compare the processing fees charged by different lenders and then make a decision.
- Collateral- There are two types of loans available in the market today- secured and unsecured. A secured loan will require collateral and an unsecured loan will not need collateral. Decide on the type of loan you wish to apply for and proceed accordingly. If you apply for a secured loan, you will have to hypothecate an asset with the lender to get access to funds.
- Interest rate- The loan amount and interest will have to be paid over the tenure of the loan. The interest rate will have a huge impact on the EMI amount and the total cost of borrowing. Compare the rate of interest offered in the market and then make the borrowing decision. Choose a lender that offers funds at low rate of interest.
- Use the EMI calculator- It is recommended to use an EMI calculator before you sign on the documents. The calculator is available online and is ideal for the use of borrowers. It is easy to use and will give an EMI estimate within minutes. All you need to do is provide the loan amount and tenure to get a quick estimate. Change the inputs until you reach an optimal output. You will manage to make a well informed decision using the calculator.
Keep these important things in mind before you apply for a small business loan. It helps to gather information, compare different lenders and then make the loan application. The loan can be utilized for any purpose, and has a high approval amount. Start by identifying the business needs and then move ahead with the procedure. The loan application process is simple and hassle free. There is an immediate approval and an instant disbursal of funds.