The MSME sector holds a crucial position in the Indian economy as it facilitates growth in the country by contributing significantly to its GDP as well as creating remarkable employment opportunities.
Accordingly, to encourage further growth of this sector, the Government of India has introduced several schemes under which these enterprises can avail funds easily.
These include initiatives such as the credit guarantee scheme, Stand-Up India, Start-Up India, Pradhan Mantri Mudra Yojana, and the likes. Apart from these government schemes, several financial institutions also extend online loans at favourable interest rates and terms to small businesses.
However, since almost all financial institutions offer online loans, individuals should look for an online business loan that meets all their business funding requirements.
They can accordingly consider the tips given below while looking for the best online business loan.
Tip 1: Decide On Your Business Requirements
Before applying for a business loan online, applicants must ascertain the requirements of their businesses. It includes deciding the type of loan required such as working capital loan, machinery loan, MSME loan, etc. To determine this, one must first ascertain the purpose of such a loan.
For instance, if an enterprise is looking to upgrade or purchase machinery, they should apply for an equipment loan. Additionally, one also needs to ascertain whether to opt for a short-term loan or a long-term loan.
Tip 2: Go Through The Features And Benefits
While looking for a business loan online, one should check for additional features and benefits such as Flexi Loan facility and online account management.
Such a facility will enable borrowers to meet any short-term cash shortage or working capital requirements easily by allowing them to draw only the requisite cash.
On the other hand, online account management from lenders like Bajaj Finserv will enable borrowers to efficiently manage their loan accounts from the convenience of their home.
One should also look for pre-approved offers provided by the lender. These offers are available on credit products like business loans, personal loans, credit cards, and remove hassles to fast-track the overall loan application procedure.
Individuals can easily check their pre-approved offers by entering only nominal information like their name and contact information.
Tip 3: Know The Online Business Loan Interest Rate And Associated Fees
While comparing business loans by different lenders, one should check the business loan interest rate charged by a lending institution. It is crucial since the rate of interest on the advance will affect the EMI amount and subsequently, the repayment plan.
They can also employ online tools like a business loan EMI calculator to compute the monthly instalment amount before applying, which will enable to frame a suitable repayment plan.
One should also go through the associated fees such as prepayment, foreclosure, document processing charges, bounce charges, penal interest, and the likes since they also add to the overall cost of the loan.
Tip 4: Check Eligibility Parameters And documentation
One should opt for a financial institution that has nominal eligibility requirements and documentation. However, prospective borrowers may need to meet some basic conditions to be able to qualify for an online business loan. These include the following –
- Applicants should be residents of India.
- They should be within the age group of 25 – 55 years.
- Borrowers should own a business that is operating for three years or more.
- They must have a clean repayment history with credit above 750.
Accordingly, given below are the documents required for a business loan –
- Proof of financial standing – Profit and loss statement, balance sheet and Income tax returns filed for the previous year.
- Proof of business ownership – Registration certificate issued in the name of business, Goods and Services Tax, partnership agreement, Article and Memorandum of association, business PAN or any other valid document issued in the concern’s name.
One must, however, go through the terms and conditions specified by the lending institution before proceeding with the online business loan application procedure. Doing so shall make sure that there are no hidden fees or charges. It will also enable them to avoid financing complications in the future.