A business loan can help you to take a big step towards shaping your dream business. It can be used for several purposes such as business expansion, purchasing inventory, providing working capital etc. However, before availing the loan, you must know everything related to the business loan. We have listed a few questions that you need to ask yourself before you apply for a business loan which is as follows:
What do you need a business loan for?
It is important to ask yourself why you need the business loan for. A business loan can be used for several purposes such as the expansion of business, purchase of inventory, buying assets or machinery and to meet working capital expenses. So, if you have such business requirements, you can take the loan to finance them.
Would you qualify for the loan in the first place?
We suggest that you ask the lender about their minimum requirements before applying for a loan. The lenders will list the minimum credit score, years in business, income proofs, age required, etc. Generally, in order to avail a business loan, you must be at least 21 years old at the time of application of the loan. Repayments are to be made before the age of 65. Banks look for a business stability or profitability of minimum 3 years for self-employed professionals. In case of other businessmen, banks and finance companies require a minimum business continuity or existence of 5 years. Plus, a credit score of 650 and above is required to apply for a business loan.
How much loan do you really need?
Before approaching a lender, make sure that you determine the amount of cash that you really need. If you apply for a loan amount which is higher than your eligibility, it can create doubt in the mind of the lender and lead to rejection of your loan application. So, always apply for the loan amount that you can easily repay in future.
Can you prepay your business loan?
Before availing a business loan, it is better to ask for prepayments on the same. In case, if you have excess funds at a later stage, you can repay the loan before the completion of its tenure. This will help you save on interest payments. Banks generally levy prepayment or foreclosure charges of up to 5% on business loans.
What are the customer reviews?
Before choosing a lender, reading other peoples’ experiences with them is an essential step. Google the lender you are considering before you sign the loan agreement, just to see if there is anything positive or negative you should investigate. You can also visit the websites of third party for the same. User reviews aren't infallible, of course; use them to raise questions you need to be answered.
How can you apply for a business loan?
You can apply for the loan in several ways. You can directly visit the bank’s branch and meet the salesperson, contact a loan agent or apply online at any bank or NBFC’s website. You can also check and compare best business loan interest rates offered by all banks online and apply for the loan that meets all your requirements.
Conclusion: Hence, if you are planning to apply for a business loan, you should be aware of all the basic details of the loan in order to avoid any hassle or problem in the future.