A nine-to-five office job can get boring. So, have you decided to throw your hat in the ring of entrepreneurship? Being an entrepreneur is a great path for those who want to fundamentally reshape how things work by implementing ideas. Whether you are in the ideation, MVP, or other stages in your entrepreneurial journey, the success of your business venture is inherently tied to your financing decisions apart from others. A well-thought out borrowing for a specific purpose can give your business the much-needed boost, while a random financing decision can make your venture go bust.
You may need business loans for running a pilot or a market research, managing day-to-day operations, fulfilling working capital requirements, and long-term business expansion. As per your business loan requirements, there are several types of loans available and it would be a good idea to know about them. Let us also understand the steps to be followed to receive a business loan from Lendingkart, reasons for securing a business loan from Lendingkart, factors influencing EMI, and how to build a strong history for getting instant approvals.
Variety of business loans for entrepreneurs
Different types of business loans fulfil different business needs, and as a business owner, you must be aware of the business loans available –
- Secured business loans
A secured business loan requires a business owner or an entrepreneur to pledge a collateral as a security against the loan amount. This collateral could be an asset such as land, property, factory, inventory, or equipment that could be liquidated in case of a default. Since there is a cover for the loan amount translating to lower risk, secured business loans typically have a lower interest rate. These are especially useful if you are looking forward to borrowing a large amount of money for your business needs. The approval process tends to be a bit longer because of physical verification of assets pledged as collateral.
- Unsecured business loans
As the name suggests, an unsecured business loan does not require collateral against the loan amount. However, this refers to a higher interest rate due to higher risk and more stringent eligibility and documentation. For a business that does not have much assets to pledge as a security, unsecured business loans could be used for managing short-term financial obligations.
- Letter of credit
For an entrepreneur who is engaged in import and export or domestic trading of goods, a letter of credit is a useful way of financing such business transactions. In a letter of credit arrangement, a bank offers the commitment of payment on behalf of the buyer especially if the buyer is not well-recognized or trustworthy by the seller.
- Cash credit
Cash credit is usually used for meeting short-term business obligations. This usually involves setting up a limit up to which a business can borrow funds quickly. Unexpected shortfalls in cash and day-to-day business expenses can be managed through a cash credit facility.
- Invoice factoring
When a business sends invoices to its customers for its goods and services, there is a certain time period after which the invoices are paid in full. If the business requires cash, then invoice factoring allows it to sell those invoices to a financial institution at a discount and receive immediate cash. This helps in meeting day-to-day business expenses and addresses the funding gap arising out of invoice payment cycle.
- Term loans
These are typical funding arrangements where a fixed amount is borrowed for a specific tenure. Term loans are usually utilized for financing one-time needs such as purchasing an equipment or property, business expansion, etc.
Steps to be followed for securing a business loan with Lendingkart
Securing a business loan with Lendingkart could be a way to finance your business needs. Before proceeding with the application, make sure that you check the business loan emi calculator and get a sense of the monthly EMI amount, interest payable, and total amount to be repaid. Lendingkart offers business loans from ₹50,000 – ₹2 crore. Following are the steps to be followed for availing a business loan from Lendingkart –
- Identify funding requirements
Do you require funds for your day-to-day operations or for scaling up your venture? Are you planning a new market entry in the near future? Are you looking to increase your product capability with a technological upgrade that requires investments in R&D? Based on your requirements, the loan amount, tenure, and type will be determined. So, for your day-to-day operations, you would want to avail of a short-term business loan instead of long-term loan.
- Check the eligibility criteria
Lendingkart has specific eligibility criteria for its business loans depending on the type of business incorporation. Some blanket criteria are that the loan applicant must be between 18 – 65 years of age, the business must be generating cash profits for the last two financial years, and the financial statements must be audited by a registered chartered accountant. The other documentation required are a valid Government ID, bank statements, trade license, sales tax certificate, and business ownership documents. If you are self-employed, then you must produce proof of that profession. E.g. a valid medical registration number for doctors, CA registration number for chartered accountants, etc.
- Keep documents ready
Organize your documents carefully along with scanned copies in a single location so that you can get done with your application at one go.
- Apply
The business loan application process is online and you have to click on “Apply now” by navigating to the URL: https://www.lendingkart.com/. You have to fill in your personal information as per PAN card, contact details, type of business, business history, and monthly sales figures. After clicking on “Check Eligibility,” you will be informed whether you are eligible for a business loan or not. If you receive a go ahead, then you need to upload your documents
- Get a loan offer
Lendingkart will evaluate your business strength and loan application after which it will present you with a personalized loan offer. The loan offer will contain details such as approved amount, interest rate, repayment tenure, and EMI. Terms and conditions and other fine prints will also be mentioned in the offer.
- Sign the loan agreement
Check the terms and conditions, sign, and send the agreement back to Lendingkart with your KYC details.
- Receive funds
Funds are usually received within 72 hours which you can use for multiple business purposes.
Reasons for getting a business loan from Lendingkart
Receiving the right kind of funding can make your business expand or manage business operations seamlessly. As opposed to traditional lenders, lending institutions such as Lendingkart that have quick eligibility checks and approvals represent a strong competitive advantage for businesses. Following are some reasons of opting for a Lendingkart business loan –
- Digital process
The online business loan application process of Lendingkart is convenient and hassle-free. It enables loan application through a digital process without having the need to physically visit an office.
- Quick approval and disbursement
Eligibility checks, approvals, and disbursements are quick that save a lot of time. You receive a tailored offer that takes care of your financing needs.
- Competitive interest rates
The interest rates offered by Lendingkart are competitive with respect to rates available elsewhere.
- Collateral-free
You do not have to pledge any collateral for loans up to ₹2 crore. This results in more freedom for your business as you can utilize assets without any issues.
Factors affecting your monthly EMI
Your monthly EMI amount gets affected by the following factors –
- Amount of the loan
Higher the loan amount, higher is your monthly EMI. More borrowing means that your obligation is higher and therefore, your repayment amount is also higher.
- Interest rate
For a certain amount, EMIs will be higher for loans having a higher interest rate than the ones having a lower interest rate. As a business owner, opting for a lender with a lower interest rate means you save more money instead of spending that on interest payments.
- Tenure
For a specified amount and interest rate, higher the tenure of a loan, lower will be the monthly EMIs. Though a higher tenure results in lower monthly EMIs, it also results in more interest payments overall compared to a loan of the same amount having lower tenure.
Building a strong credit history
Building a strong credit history takes time and effort, but if done, brings in rewards such as favorable loan terms and market reputation. Here are some of the ways in which you can build a robust credit history –
- Keep credit inquiries to a minimum
The more credit inquiries you do, the lower is your credit score. Instead, focus on a thorough background research keeping in mind the eligibility criteria, apply for a single loan at a time, and receive the disbursement.
- Utilize credit judiciously
Do not utilize all the loan amount that you receive. It is recommended to keep the utilization of credit to 30%. This represents that you can manage the business operations efficiently.
- Repay on time
Late payments get reported to credit agencies and those bring down your credit score. Always make your payments on time which will make your credit history strong.
- Get your business rated by a credit-rating agency
Getting CRISIL or ICRA to give you a rating increases the creditworthiness of your business. This eventually helps you get business loan products at favorable interest rates.
Conclusion
As an entrepreneur, financing your business is always a challenge because there are several trade-offs that you need to make. Fortunately, if you approach business financing with a keen understanding of your business requirements, you will be able to plan your needs in a better way. You need to maintain strong financials and creditworthiness for receiving funds in terms favorable to you. Such practices instill discipline and can go a long way in making a venture a successful one in the future.
