Establishing a new business is a mammoth task as it requires initial setting-up efforts, employee hiring, gaining market presence, and not to mention the unending fund requirements. Whether it is a new business or an established business which is looking to expand, each will have its own set of fund needs which can be sought from various sources.
Some businesses may require funds to meet the working capital expenses, some others may need it for revamping or upgrading the existing infrastructure. Irrespective of the needs of the business, funds must be sought only after appropriate planning and research around on the available lenders.
The Indian business loan market has many lending institutions including banks, NBFCs (Non-Banking Financial Companies), and even digital lenders. While choosing a reliable lender for your business’ loan requirements, several factors have to be considered and carefully assessed. Borrowers can easily compare lenders using various parameters and make the right choice by using some of the online lending solution providers.
Here is what one must consider when comparing business loan lenders:
Application Process of Lender
For availing a business loan, most lenders will hand out a loan application form to be filled in. As a business owner, you will have to support your application with valid documents such as identity proof, bank statement, detailed business plan, etc, depending on the lender’s requirements.
When comparing lenders, one of the main aspects to consider is the application process and whether it is easily accessible. Make sure that it is streamlined and easy-to-follow at all stages.
Choose a lender that has a reasonable presence online. This way, the entire application process can be easily completed online at your convenience. Make sure that the lender offers a speedy and transparent application process with fast loan disbursals. This will also depend on the documentation requirements set forth by the lender. Opt for a lender who offers minimum documentation and hassle-free loan processing.
Business Loan Cost
The three key items to consider in a business loan cost are interest rate, processing charges and other charges if any. These factors make for the total cost at which you can avail a business loan from any lender. While looking for the best business loan provider, you must try and understand the fees that will be levied by the lender. The total cost must be transparently presented to you in the loan agreement and should be reasonably priced.
Banks and other lenders may charge a late fee as a penalty for delayed repayments. When you are comparing among business loan lenders, make note of the different types of penalty charges that would be levied in case you default on loan repayment. Some lenders may also levy charges for foreclosing a loan. It is therefore important to be clear about all charges involved. A lender who offers you foreclosure benefits without any fees is an ideal choice for any business.
While researching about business loan lenders, go through various lender reviews written by customers online. This will throw light on the lender’s reputation from the point of view of borrowers. A loan provider who has been consistently getting positive reviews from customers is sure to be an ideal choice for your business loan needs. Talk to various business associates and circles to know about the right lender contacts who are preferred by most businesses.
One of the most important features to look for in a lender is the kind of customer service offered to clients. Look for companies that are ready to make themselves available via multiple channels of communication, such as, phone, email, etc.
The lender should have staff who are highly knowledgeable, approachable, and most of all, professional. Business financing can be a long and tiring process, so you must ensure that the lender is patient throughout all the lending stages.
Look for lenders who accept multiple payment methods: online, cheques, ECS, etc. Some lenders would accept a physical cheque for EMIs. This can help in maintaining a track record of all the payments and make the payment process hassle-free. Try to opt for lenders who ensure convenient repayment.
Banks are known to be the least flexible especially when it comes to business loans. They generally expect applicants to have spectacular credit, collateral to offer and established business history. They are also uncertain about financing equipment that is capital-heavy. Thus, the lender you choose should have some flexibility to make all the loan seeking steps easier for you.
Eligibility Criteria of Lender
Each lender has a predefined list of eligibility criteria set for business loans. You must try and go through the various terms and conditions in detail to check if the business can meet those. Business loan eligibility criteria usually have a preference for established businesses with a good track record. There is also a predefined age-limit for business owners.
Things to Avoid While Selecting Business Loan Lenders
Commission-Driven Lenders – While searching for the right business loan lender, you may come across brokers who offer business loans at tempting prices. Brokers who act as intermediaries between you and the actual business lender may prove to be costly. This is because they will charge you a commission for their services. They may also end up selling you an expensive financing solution.
Hidden Charges – Some business loans could also have a long list of financing fees which are not disclosed at the beginning. This could result in a significantly higher cost of funding. Make sure that you know about all the fees from the start instead of realising it later.
While searching for a business loan lender, you may feel like you are short on time. However, thinking through and taking your time is safer than sourcing a loan from the wrong lender. Selecting a loan hastily can tarnish the business operations as it will then have to struggle with a lack of finance or heavy cost of funding. Hence, take your time and compare among various lender options to select the right one.