Considerations to Focus on While Choosing a Business Loan

India secured the 77^th rank among 190 countries in the ‘Ease of Doing Business’ index for the year 2018. India is proceeding at a swift pace towards the target of attaining a $5 trillion economy. The potential reasons behind such improvement in the business environment in India are –

• Relaxation in business norms.
• Better credit facilities, including easier business loans disbursals, capital funding, etc.
• Faster permits from authorities for building business premises.
• Improvement in trade across borders.
• Upgradation in technology and infrastructure.

According to the Department of Industrial Policy and Promotion, India currently ranks among the top 25 nations where people dealing in the business get better access to electricity, credit, and backing from the government. With all these attributes combined, the country is expected to reach spot 30 in the ‘Ease of Doing Business’ index by the year 2020.

Role of financial institutions in supporting business

The financial institutions in our country take up the responsibility of extending monetary support to business houses. In a way, these institutions are also custodians of the nation’s economic growth and development. 2 primary ways in which financial institutions benefit business enterprises are –

1. Encourage saving habits

Business owners and start-up planners are encouraged to save their funds so that they can be utilised in a profitable investment. Savings also help the economy through capital formation.

2. Advancing loans

The crisis in any business is inevitable. Financial houses come to the rescue of entrepreneurs at such times. Disbursing loans for business, profession, capital and charging stipulated business loan interest rates, home loan interest rate is one of the primary functions of a financer. This is one of the ways in which business loans are a boon to the economy as a whole.

However, the evolution of a business entity depends upon a proper amalgamation of the benefits provided by the financial institution and the business requirements. For that matter, an entrepreneur has to make a wise choice

Points to consider while choosing a business loan

1. Financial requirement

Borrowing only as much needed is a wise move for any business house. Thus, before availing a business loan, it is important to determine and estimate as to how much funds the company/enterprise needs.

2. Purpose of the loan

It is necessary to consider your objective behind borrowing the business loan. From helping you raise business to raise funds, purchasing capital or financing the company’s daily expenses, a business loan can be availed for any of these. As such, the purpose to avail the loan and how to utilise the available funds is vital.

3. Credit score

Withdrawing a loan for business is a smart way to improve your credit score. Entrepreneurs, as well as start-up planners, often opt for such loans to increase their CIBIL score. Repaying a short-term loan as per the repayment schedule improves the credit history and the score.

4. Tallying the options

Not every financial institution offers the same business loan interest rates. The terms and plans also vary from one lending house to another. Thus, it is important to study and tally the terms, tenor, interest rates, and other conditions well before availing the loan.

Reputed lending houses such as Bajaj Finserv bring pre-approved offers on such loans to make availing simpler and easier. These offers are available on home loans, personal loans, credit cards, and many other financial products as well. You can check your pre-approved offer to fill in basic details like your name and phone number.

Financing the business expenses the correct way is of utmost importance. It can not only have short-term benefits but could also turn out to be a long-term boon.