With increased accessibility to the internet, there’s no dearth of information regarding any given subject, including small business loans. Micro, small and medium enterprises have emerged as a driving engine of the Indian economy with overwhelming contributions. Their role has been integral in employment generation across the nation.
- MSME contributions in the overall exports of India – around 40%.
- Employment generation by small businesses across India – about 110 million.
To fuel the growth of MSMEs and SMEs further, entrepreneurs seek business loans for additional financial support. Borrowers can utilize the fund for business expansion, introduce the new product line, take up bulk orders, infrastructural up-gradation, inventory upkeep, debt consolidation, strengthening working capital, and more.
Before availing, they prefer to evaluate the lending product based on the financial market’s information. However, with variants of business loans, numerous myths can compel borrowers to make somewhat wrong decisions. This article highlights 6 such myths about business loans to help you avail the best product.
6 Myths on Small Business Loans Busted
Loan Approval Goes Lengthy
When planning to avail of small business loans, most applicants worry about the approval and disbursal time. Indeed, it was a fact earlier, but lenders nowadays offer online loan applications faster and simplified processing. An eligible business owner can receive instant approval and quicker disbursal within 1 – 2 days after a successful application.
Online Lenders May Charge Unreasonable Rates.
Understandably, trusting the new online convenience instead of the conventional loan process is challenging for many. Borrowers can, thus, rely on experienced, reputed lenders who offer a reasonable business loan interest rate. Once you accurately fulfill the eligibility parameters, you can negotiate for a lower interest rate on your loan.
Pledging Collateral is Mandatory.
Prominent NBFCs sanction small business loans against zero collateral or guarantor. This reduces any risk of asset confiscation in case of default. However, the funds are sanctioned based on specific eligibility parameters like age, net monthly income, credit score, FOIR, etc. Know the criteria for business loan application approval before applying.
Loan Amounts are Always High.
A common notion goes – use credit cards or personal loans for small amounts. However, the fact is that even unsecured business loans can come in smaller amounts to address your immediate monetary needs. You can avail of up to Rs.20 lakh at an attractive business loan interest rate. Lenders ensure flexible repayment options with manageable EMIs.
A reputed non-banking financial company, Bajaj Finserv brings pre-approved offers on business loans, personal loans, and a plethora of other financial products. These offers ease the entire process of loan application further and help save time. You can check your pre-approved offers by providing name and contact details online.
Creditworthiness Doesn’t Matter After Availing of Loans.
Fact is creditworthiness continues to matter even after you take a business loan. An indispensable aspect of the credit application process, poor CIBIL score or report can lead to loan rejections in the future. Besides, the importance of your business credit score is manifold.
Hence, ensure to make timely repayments and maintain a financial discipline to enhance your creditworthiness.
Loans are Only for Sinking Businesses.
As the loan is an additional financial liability, most owners are skeptical and consider the product only for a sinking business. The fact is business loans can be opted for by any enterprise for purposes like working capital boosting, equipment purchase, stock purchase, employee hiring, etc. On the other hand, an owner can revive a struggling company with small business loans by paying off their debts, improving cash flow, and coping with a financial crunch.
- Close to 6.33 crore MSMEs are currently functional in India.
- 99.4% of these are micro-enterprises.
Availing a small business loan is a significant financial decision that impacts the progress of your venture. Create a robust business plan which outlines the utilization of credit elaborately. Lastly, ensure that the facts are right, compare available options, and settle with a reputed lending institution for the most suitable financial product.
India’s micro, small and medium enterprises have become an integral part of the economy today. It plays a significant role in employment generation and supply chain, with around 40% contribution to total exports. To maintain its operational work and boost its growth, entrepreneurs seek small business loans for investment and expenditure.