Want to establish a new startup, expand an existing operation, or perform any other business-related activities that require substantial investments? Well, in that case, business loans are exactly the kind of financial instrument you require! Of course, we don’t recommend blind faith when it comes to any financial contract. So, keeping this in mind, here’s a broad overview of everything you possibly need to know about unsecured business loans.
First Things First – What Is A Business Loan?
In layman’s terms, a business loan is a financial instrument tailored to serve the financial needs of an organisation. As is the case with most loans, it’s a debt that the borrower – in this case, the company – needs to repay as per the terms and conditions mentioned in the loan agreement.
A business loan is considered to be a critical financial instrument, especially in the early stages of the operations. Most companies use business loans during this period to pay off wages & salaries in the early goings of the business, pay rent for the business premises, purchase office supplies, or any other similar requirement.
Elements Of A Business Loan
If you’re a newcomer to business loans, then there are certain elements that you should be aware of:
- Principal Amount: This is the amount that you’ve actually borrowed and haven’t paid back yet. Generally, this amount is paid off on a monthly basis as per your loan agreement – with a few additions.
- Interest Rate: The EMI that you pay on your loan has two elements – a fraction of the principal amount, along with the interest amount levied on your loan. This amount is calculated through the interest rate.
- Loan Tenure: This is pretty self-explanatory – the total time period for which you’ve taken the loan for is your loan tenure. Generally, business loans have longer loan tenures than their personal counterparts.
- Fees: If you’re not familiar with the details of a business loan, then learning about the various fees that can come up during this process is something you should be aware of. There’s an upfront fee that you might have to pay upon the issuance of the loan. Along with this, there are various ongoing fees that arise over the course of the loan tenure. One thing to definitely keep in mind is prepayment penalty fees, which can be incurred if the loan amount is paid off before the due date.
Types of Business Loans
Business Line Of Credit
A revolving line of credit that can be utilised whenever you need financial assistance for your business, a business line of credit is one of the more widespread forms of loans that are used to assist a business through adequate financing.
An overdraft is an existing line of credit attached to a business’ existing transaction account. The limit of this overdraft amount depends upon the credit history, cash flows, length of the banking relationship, and the repayment history of the business.
Working Capital Loan
These loans can only be used to finance the working capital of the business and generally feature a lower rate of interest. Most banks are generally more comfortable with giving working capital loans since they have a higher degree of control over the manner in which these funds are utilised.
A term loan is generally used for the acquisition of long-term assets for the business. It’s taken for a pre-specified tenure (generally lasting anywhere between 2 to 10 years). These loans can also be taken in foreign currency, with their official terminology being Foreign Currency Loans.
Banks and NBFCs – Your Go-To Business Loan Providers
When it comes to availing a new business loan, there are really only two types of financial institutions that provide these loans – banks and Non-Banking Financial Companies (NBFCs). However, while the former might seem like the more prevalent and accredited source to take a loan from, the fact of the matter is that some businesses might find themselves stuck in a constant back-and-forth with these institutes due to the restrictions and the tedious paperwork involved.
This is one of the major reasons why NBFCs are quickly exploding in popularity as one of the best outlets that provide instant business loans.
Generally speaking, NBFCs are swifter when it comes to the loan application process, disbursing loans at incredibly swift rates. This has led to a gradual shift in the financial landscape, with businesses in need of quick and reliable funding moving towards NBFCs as their go-to source for business loans.
Eligibility Criteria for a Business Loan
For the most part, the eligibility criteria of business loans are common across multiple banks and NBFCs, barring a few minor differences. At Clix Capital Business Loan provider, you need to meet the following eligibility criteria before applying for a loan.
- As an individual: You need to be at least 21 while applying for the loan and under 65 at the end of its tenure.
- As a business:
- You need to be a proprietorship/private limited company/closely held non-listed company/partnership firm involved in the business of manufacturing, trading or services.
- Your turnover should be a minimum of Rs 1 crore.
- You should’ve regularly reported audited financial statements for the last 24 months, routed the majority of the business through a banking system, or captured your turnover in the last 12 months through GST returns.
- Your business needs to have a minimum total vintage of 3 years.
If you meet all these criteria, then rest assured that your gateway to attaining a quick business loan from Clix is pretty much guaranteed.
Benefits Of Taking a Business Loan
There are numerous benefits that one can enjoy through the attainment of a business loan. With Clix Capital, here are few of the many advantages that one can enjoy.
- Flexible loan amount disbursals: Financial requirements vary from business to business, making it all the more important for businesses to figure out the best financing avenue that will provide them with a source of finance that’s not set in stone from the get-go. With Clix Capital, you can choose a loan amount that ranges between Rs 5 to 50 lakh, catering to all your business needs regardless of their scale.
- Ease of repayment: Strict restrictions are the last thing anyone would want to abide by when it comes to securing their finances. After all, if these restrictions are too limiting, then the financial instrument you opt for might become quite a hassle. This is where the concept of flexible repayment schemes come into play, with Clix allowing borrowers to choose a time period that ranges from 12 to 36 months (48 months if you happen to be a self-employed professional).
- Minimal Documentation: One might argue that paperwork and hassles are two sides of the same coin, and it’s easy to see why they might have this viewpoint. Generally speaking, documentation is a pain to handle in most contexts, especially from a financial point of view. Clix understands the hassles you experience and ensures that you have to deal with minimal documentation during the loan application process.
How to Apply for a Fast Business Loan
Applying for a loan at Clix Capital is as simple as can be. All you need to do is follow these steps:
- Fill in a brief application form to kickstart the loan application process.
- A representative will then reach out to you for a quick discussion to understand your requirements.
- After you have done the above, Clix Capital will take care of the rest!
Things to Keep in Mind Before Going for a Business Loan
Make sure you adhere to your business plan
Your business’ financial requirement should be a genuine concern and not a fabricated one. If the finances you want don’t fall under the grand scheme of the business and its future plans, then it goes without saying that you’ll find yourself stuck between a rock and a hard place later on.
Prepare your financial statements
As a business, you need to ensure that lenders feel that your financial requirement is a legitimate one. This is where the concept of financial statements come into play, allowing you to convey these monetary needs to potential lenders in a concise and tangible format. This will help improve your chances of attaining the loan you want.
Ensure that you know how much your loan will cost in the end
Every business has a particular capacity when it comes to availing a loan. While financial needs are definitely constant, accomplishing the same might not be feasible for your business until a particular point. Thus, requirements need to be prioritised so that you don’t take a loan that’s well over your limit. This mandates you to check out the final cost of your loan after all the payouts so you can map out your business plan accordingly.
A business loan has evolved into a go-to avenue of finance for most industries. This article encompasses all the ins-and-outs of this loan, including the elements, types, eligibility, and other such factors of this loan. If you wish to attain funding for your business, then look no further than a business loan from Clix Capital to satisfy all your lending requirements.