Preeti runs a handicrafts shop in among the prime commercial markets in Delhi. She setup this shop significantly more than two years back and the response from customers has been very much encouraging. She sources the raw pieces from local artisans across North India and gets those done by another pair of artisans in Delhi. Her customers result from around India and even from abroad. The majority of the regulars are very impressed by her trade that they desire her to start branches in their cities or at the very least get into partnerships with local dealers there. However, every one of these initiatives require funds and while she’s confident of succeeding in future, getting use of the right business loans in India is just a major obstacle. Also, while establishing a trading continues to be easier, routine operations require regular use of loans from the capital finance India market. There are numerous such entrepreneurs as Preeti whose expansion plans do not materialise due to want of adequate infusion of funds.
Also, she has by now realised that it is normal you may anticipate a delay of 30-90 days in getting payments from customers for bulk orders. Such a delay impedes her power to scale up her trading unless she seeks business loans in India. Before, she has approached banks and other traditional non-banking finance companies (NBFC) with loan applications in the capital finance India market. Most demand collateral for providing business loans in India. However, small businesses like Preeti’s do not always have adequate collateral, even for having a business loan in Delhi. The capital finance India market shows that banks follow a predetermined format for loan applications, and those require her to provide way too many documents in support. Moreover, she needs to make several rounds to their branches and present detailed projections linked to her trading prospects.
Such prolonged processing for verifying the applying for a small business loan in India negates ab muscles purpose of taking short-term business loans for an enterprise that’s wanting to scale up operations. Moreover, the short-term loans supplied by banks follow a firm repayment schedule that will not take into consideration the genuine problems faced by a small trading during its operations. They also impose penalties in case there is pre-payment of business loans in India, sotrading persons are compelled to bear the loan burden for its entire tenure.
Fortunately, yesteryear decade has seen the rise of technology-enabled lenders called FinTech companies. These lenders utilize the latest technologies such as for instance Big Data and other data analysis techniques to process the loan application in the capital finance India market. A trading owner can complete the loan application online or through the mobile app, and once the business enterprise loan is approved, the quantity is credited to the bank account within three working days.
However, before a small business thinks of having a loan for scaling up its business, here is some key advice:
1. Always Take the Right Quantity of Business Loan in India: A small business owner should carefully estimate the requirement for business loan in India and only seek the quantity that is sufficient to scale up its business. Overestimating the requirement will put an unwanted burden on its operational costs while underestimating the requirement shall defeat ab muscles purpose of seeking a small business loan in India. Business loans in India have to be repaid according to schedule, as any deviation shall cause a poor impact on the credit rating of the business. In the capital finance India market, lenders review the credit rating seriously before considering a small business loan application.
2. Prepare the Case for Taking Business Loans in India: In the capital finance India market, a lender must be convinced concerning the loan repayment convenience of a small business before disbursing loans to them. Therefore, it is vital that you prepare an effective business case for seeking business loans in India. For example, if you need the business enterprise loan to bridge the shortfall in cash flow, suggest that honestly and upfront. A small business genuinely faces cash flow problems due to delays in receiving payments from their customers. However, this delay shouldn’t affect their future business needs, so it’s simpler to have a short-term business loan. Similarly, an on the web seller might need a small business loan to boost its stocks before a future festival where it is confident of creating an excellent revenue. scale out vs scale up Such a trading should confidently present its case before a lender in the capital finance India market. This shall boost its chances of securing business loans in India.
3. Choosing the Right Financial Product: FinTech lenders in the capital finance India market understand the trading cycles of small businesses and accordingly offer new and innovative business loan products. For example, term finance is an unsecured loan for businesses which were functioning for significantly more than two years and have healthy business financials. It offers urgent funds for a short-term business need and can be studied for a period of time varying from a few months to three years. Similarly, a small business that has pending invoices from large companies may consider taking supply chain finance or invoice financing. Such a business loan provides up to 80% of the pending invoice amount upfront, and the client has the choice of paying back instalments or in one single go whenever the invoice payment is received.
In the event a small business receives payments from customers through credit/debit cards, it may consider having a merchant cash advance. Here, you will get up to 200% of one’s monthly card receivables as advance. This amount is paid back through deduction of a fixed percentage of the card settlement monthly before advance amount along side lender charges are paid back total.
Another product, online seller finance is wonderful for merchants who sell aggressively through online marketplaces. A merchant may take business loan in Delhi to tank up stocks during a sale or even to reach out to more customers across different regions.
4. Compare the Annual Percentage Rate of Business Loans: Today, there is a lot of preference in the capital finance India market while applying for business loans. Most loan products by FinTech companies have already been designed bearing in mind the requirements of small organisations. However, once you obtain loan offers from different lenders, it is prudent to check the annual percentage rate (APR) provided by every one of them. This shall provide a reasonable idea of how expensive a particular trading loan is and whether having a business loan from the particular lender is worth the cost or not.
A small business should look beyond banks and traditional NBFCs towards new age FinTech companies giving more importance to trading prospects while providing business loans in India. They are not riddled by legacy loan processes, and their products have already been designed to provide maximum benefit to small trading, when it comes to both transparency and loan repayment schedules.