Commercial loan: 5 crucial questions before applying
A business loan is the first thing that comes to mind; after trying sincerely and for a long time to assemble a workable marketable strategy, the last element to move the tasks forward is the grant.
Despite the fact that there is nothing wrong with this idea, there are various problems associated with the correct acceptance of the obligation at the beginning, it is necessary to answer five essential questions:
1. Is the commercial loan compulsory?
As mentioned earlier, a business loan has many implications. Therefore, consider all angles before opting for this one. If there are untapped private funding sources, the loan may not be necessary. When a better option is available, going into debt doesn’t make business sense, so explore all financing options before taking out a loan. For example, family and friends could lend money on friendly terms or without interest. Or angel investors can lend on more favorable terms compared to conventional lenders.
If funds are needed, one can opt for a term loan or a line of credit as needed. The precise amount needed to maintain cash flow could also be decided. If these questions are answered, he can ensure that the debt and its repayment remain under control.
2. What will be the interest rate and total cost of capital?
Knowledge of commercial loan interest rates and cost of capital is essential. A short-term loan attracts higher interest rates, which a new business may not be able to afford. Some lenders offer monthly interest rates, so insist on knowing the annual rate.
In addition, processing fees and other charges should be transparent before availing the loan to know the exact amount to be repaid and the criminal penalties for late payment, thus avoiding unpleasant surprises later. These factors will also help decide which lender offers friendlier terms. A business loan calculator is very useful to get an idea of the interest rate and the total amount to be repaid. If these factors are ignored, borrowers might find it difficult to pay EMIs.
3. How much should I borrow?
Determining how much to borrow will depend on many variables such as funds available, when the money will be used, estimated annual gross sales, etc. Proper analysis of fund requirements is essential as lenders will ask about these issues before sanctioning a lender.
4. Will there be an assessment in the office after the loan application?
Whenever one applies for a business loan (or any other type), potential lenders will assess the applicant’s credit history and creditworthiness through a credit bureau. A cursory inquiry initiated by the borrower himself is considered a soft request and does not affect the credit rating. Conversely, a detailed review of lenders is recorded in office records. Too many such requests can impact a borrower’s credit score and complex assessment.
Avoid a difficult appraisal as this can affect the prospects of obtaining a business loan or getting one approved on favorable terms in the future. To do this, apply to a single lender, where the eligibility criteria are met. Also, before applying for a business loan, make sure the credit score is healthy to increase the chances of approval. This can be achieved by repaying previous debts and ensuring that all EMI payments are made on time.
5. What does the credit history and score look like?
As highlighted above, credit score and history can make or break the chances of getting a business loan. Or they received the business loan on more favorable terms. Since lenders will check both personal and business credit history and rating, loan seekers should verify details before contacting a lender. Personal and business credit history/scores may be checked through a credit bureau. Banks, credit card companies and financial platforms such as Paisa Bazaar and Policy Bazaar also provide free credit history reports. The higher the credit score, the greater the chance that the business loan will be approved on favorable terms.
Professional loans in a few clicks
Now that these questions have been answered, the need and amount of the business loan will be obvious. For budding entrepreneurs (and others) who don’t qualify for a business loan from traditional lenders, Clix Capital is always here to meet their needs, big or small. These may include working capital requirements, expansion plans or more.
Business loans can range from INR 5 lakh to INR 50 lakh as an unsecured credit instrument. These loans include business term loans and working capital loans. The first finances investments for expansion, the purchase of tools/machines and related needs. The latter can be used for a variety of purposes, such as funding day-to-day business expenses to free up internal charges for other purposes.
To be eligible, a candidate must be at least 21 years old at the time of nomination and under 65 at the end of the term. The business can be a sole proprietorship, limited liability company, unlisted private company or partnership involved in manufacturing, trading or services with a minimum turnover of INR 1 crore. In addition, audited financial statements should be available for the past two years, with most businesses routed through the banking system or previous year’s turnover captured by GST Return. Finally, the entity must be concerned with a minimum of three years of total activity in its current field of work. If the questions are answered in the affirmative, a business loan from Clix Capital can be easily obtained.
The company’s transparent business loan process ensures that credit can be approved within minutes once all details have been verified. Repayment terms can be between 12 and 36 months, depending on the applicant’s budget and repayment capacity.
The only documents needed deal with and identify proof, financial statements and proof of business ownership. Accordingly, it is time to ensure that nothing stands between a borrower’s business ambitions and the need for funds, except a few clicks to qualify for a Clix Capital business loan.
About Clix Capital
Clix Capital is a new era NBFC that is revolutionizing the lending space by offering differentiated digital lending products, powered by technology and deep analytics. It offers a range of lending products to various MSME and consumer segment clients, including personal loans, MSME loans, healthcare loans and mortgage finance.
Clix is co-founded by industry veterans Mr. Pramod Bhasin and Mr. Anil Chawla, and is backed by private equity fund AION Capital Partners Limited (a subsidiary of Apollo Global Management, LLC – one of largest alternative investment managers in the world with AUM of 433 billion). Mr. Bhasin is the founder of Genpact and former CEO of GE Capital India and Asia, and Mr. Chawla was the former CEO of GE Capital India and Asia’s Commercial Finance Business.
Along with Mr. Bhasin, Mr. Chawla and AION jointly acquired GE Capital India’s commercial lending and leasing business in September 2016 and renamed it Clix Capital.
Article reviewed and published by Gauri Malhotra.