The business’s efficient and smooth running depends on many factors like material, labor, production, etc. The availability of sufficient funds plays a vital role in the business’s continuity and growth as they are the business’s life-blood. Thus, when the business faces a cash crunch or needs funds for growth and/or continued production, MSME loans provide the solution.
SME loans are the ideal financing solution that allows businesses to meet their working capital requirements and explore new markets. When a business has access to the required funds, it can flourish and grow and establish itself as a worthy contender in the ever-competitive industry.
Since a SME loan is a common requirement across all business types, many financial institutions offer loans for businesses. When you shop around for a SME loan online, you would be spoilt for choice.
Among the variety of options available at your disposal, choosing the best Small Business Loan is important. When you are careful in choosing the right SME loan for business, you would not only get the desired funds, but repaying the loan would also become simple and affordable.
Do you know How Can You Pick The Best Business Loan?
The task is actually simpler than you believe. You just have to consider some important aspects of the loan, and when you keep these aspects in mind, you can find the best loan for business. Let’s, therefore, explore what these aspects are and how you can find the best business loan.
How to choose the best MSME loan?
Before you start shopping around for the best MSME loan in India, you need to take some preliminary steps. Let’s have a look at what these steps are -
- Select the right lending partner
The first aspect is also the most important one. First, you need to pick the right financial institution from where you can apply for a business loan. As mentioned earlier, there are multiple financial institutions offering finance for businesses. Choosing the best among them is important. You should look at the reputation of the institution and the ease of applying for the loan. Shriram Finance is one such institution that offers an easy SME loan at attractive interest rates. Shriram Finance has the trust of its customers over the last 45 years and offers the best loan deals to empower MSMEs. So, be careful when selecting the lending partner and choose one which is reputed and trustworthy.
- Analyze your MSME loan requirements
Before you apply for MSME loans, knowing your needs is important. Availing more than what is needed would put an added interest burden on your business, and if the funds are less, the loan will prove ineffective. Therefore, you need to find the right amount of funds that your business needs so that you can apply for the right loan quantum. Assess the requirements of your business, quantify them, and then apply for MSME loans.
- Compare business loan interest rates
Every loan you avail of comes with an added interest expense, which is payable on the loan amount. This business loan interest rate is an added expense for your business, and so, you should try and choose a low interest rate business loan. If the interest rates are low, the interest expenses would also be low, which would save your additional business expenses. So, compare the business loan interest rate charged by different lenders and choose the lender, which charges the lowest rates.
- Check the loan processing time
After you apply for a working capital loan, it takes some time for the lender to process the loan and sanction the funds. This time is crucial, especially when your business needs funds at the earliest. So, check the lenders’ loan processing time and choose a lender that sanctions the loan within the shortest possible time.
- Ensure you fulfill the basic eligibility criteria
Before allowing finance for businesses, lenders check whether the business fulfills the eligibility criteria prescribed by them. Every lender has its own set of eligibility parameters, and the loan is allowed only if you fulfill the said parameters. So, check business loan eligibility criteria of lenders to find out whether your business is eligible to avail of the loan or not.
- Choose a suitable term length
Capital loans offer you a repayment tenure starting as low as 12 months and going up to 5 or 10 years. Therefore, you need to choose a tenure over which your business can affordably pay off the loan. Try not to opt for a very high tenure because the interest payments would increase. At the same time, the tenure should not be very short, or the EMI might become unaffordable.
- Assess the flexibility in repayments
Lenders allow you to repay the loan in EMIs, bullet payments and even allow you to foreclose the loan before the stipulated tenure. Check these flexible repayment options so that you can repay the loan as per your suitability easily. Also, use the business loan EMI calculator to find the best repayment option so that the loan becomes affordable and easy to repay.
- Compare the cost of the loan
Besides the interest rates, business loans also incur processing fees, prepayment charges, etc. Therefore, you should check the schedule of charges of different lenders and opt for a lender that has the lowest charges so that your expenses can be reduced.
- Find out the mode of loan disbursal
Find out how the lender would be disbursing the loan after it is sanctioned and the time required. Some lenders might allow the loan in tranches while others allow the entire loan in one lump sum. So, check the mode of disbursal to find out whether the mode would suit your business requirements or not.
- Assess the use of the fund
This step should be taken with the step mentioned above, wherein you quantify the business’s requirement. Besides finding out the amount, also find out the purpose of the loan. Lenders want to know the purpose of the loan before they sanction the loan. So, you should justify the need for which you are seeking a loan for your business.
- Check your credit score and approval rates
The credit score is the measure of the creditworthiness of your business. It tells the lender the likelihood of repayment of the loan. A high credit score means that the loan would be repaid easily, so lenders prefer to sanction loans to borrowers with a high credit score. So, check your credit history before applying for the business loan and ensure that you have a high credit score so that the loan gets easily sanctioned. Also, check the approval rates of the lender to ascertain whether your loan would be easily sanctioned or not.
- Find out the collateral for the loan
Though most small business loans are collateral-free loans, in some cases, the lender might need collateral security based on whose value the loan would be sanctioned. So, find out whether the loan that you need requires collateral or not. If the collateral is needed, arrange for the same so that you can get the loan easily.
Modern-day lenders have simplified the process of availing a business loan. You just need to fulfill the business loan eligibility criteria, and then you can apply for business loans online. The online business loan application process is easier and allows you quick access to funds. If you apply for Shriram Finance Business Loan online, your loan requirements would be easily and quickly fulfilled. Moreover, the Shriram Finance business loan is a low interest rate business loan,which is also affordable. So, first, find out your business needs and then use the tips mentioned above to find the best small business loans available in the market.