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3 Things To Keep In Mind While Availing A Business Loan

By Author: Aishwarya Mahurkar
Total Articles: 291

A business loan is a type of SME loan which is offered by financial institutions to businesses to meet their day to day requirements. Such a loan has tenure of 5 years and can applicant can apply for a business loan of up to 35 lakhs. Such a loan offers flexible tenure options for the business and has an easy application process with minimum documentation requirements. The three things one must keep in mind when applying for a business loan are:

Plan ahead

Before applying for the business loan it is important for the company to definitively decide what to use the loan amount for. It is important for the company to plan how the loan shall be used as this will help effectively ensure that the repayment of the loan is on track. A company should only consider applying for such a loan to finance the purchase of long term assets or to help large seasonal sales variances. Such a loan should never be used to pay off debts. Doing so will only worsen the condition and put the company in a position where they cannot repay the financial institution which will cause the credit score to fall causing problems in the future.

Choose the correct financial institution

Before applying for a business loan, the company must look at all the financial institutions which provide such a loan to businesses. This will help them choose the one institution which offers the loan at an affordable interest rate. Another thing one must consider is whether or not the institution offers a flexible repayment options. This will be extremely beneficial in case the company does not have the funds to repay the loan amount.

Tenure of the loan

A company must select the tenure of their loan with care. A short tenure may ensure that the financial burden remains for a shorter period of time. However, this causes the monthly EMI charges to increase which the company may not be able to afford. A longer tenure however can cause the entire repayment process to become too drawn out which is problematic for the company. Hence the tenure for such a loan must be decided keeping in mind the expectations of returns in the coming years. Since the loan amount is smaller, a long tenure would not be advisable for a company.

A business loan is ideal for startups and small businesses that require additional funding. These companies must use such loans to help grow their business and improve their returns which helps not only in repayment of the loan but benefits the company overall.

Author Bio :

The author is a seasoned writer on finance topics and she articulates aspects that are important to people availing the home loans facility. She writes about a variety of topics covering the home loan documents, rates & business loan that help to make the best decision.

Total Views: 119Word Count: 476See All articles From Author

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