How to Decide Which Type of Business Loan Is Right for You? | Rupeezo

By Rupeezo | 28th, Mar, 2023

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No matter how big or small your business is, it does require massive funding. And business loans are the most accessible and useful option to finance your business and operational needs.

To decide the right type of loan for your business, you have to consider age, growth, profits, and many other factors. Gauging the health of the business is the foremost step to evaluating and selecting the right loan from the sea of business loans online.

Also, the purpose of taking the loan and your capability to repay the loan matters when considering the different types of loans.

So to get familiar with the different types of business loans and understand which instant business loan is fit for your financial needs, continue reading!

Things to Bear in Mind When Applying for a Business Loan

There is various type of business loan available to fund your business and its operations. The most common business loans in India are:

• Working Capital Loans
• Business Line of Credit
• Overdraft Facility
• Traditional Loans
• Term Loan
• Machinery Loan

Depending on your business requirements, you can select the loan that best matches your own terms and requirements. Before you head on to choose a business loan online, here are some tips to stick to-

Know Your business

A thorough assessment of your business will allow you to know how lenders will perceive your business. It is important to know your business from the lender’s perspective in order to get approved for the loan. By checking your credit and financial history, you can find what type of small business loans are more suitable for you. Also, consider the debt-to-equity ratio when applying for a business loan. A debt-to-equity ratio helps you determine the loan amount or debt risk you can take at a certain stage of your business.

Interest Rate of the Business Loan

Considering the interest rate of the loan is critical, apart from focusing on the loan amount. The interest rate for the business loan depends on the borrowing amount, repayment period, etc. It also varies amongst the lending options or the lenders. So always compare the interest rates when selecting a financial option for any type of business loan.

For instance, taking a business loan of INR 10,00,000 with a shorter repayment tenure entails a higher amount of EMIs while having a lower interest rate. On the other side, the loan with a longer tenure will include a shorter amount of EMIs but a higher interest rate. So, choose wisely based on your repayment capacity.

Terms and Conditions of the Loan

Before you read through the terms and conditions for business loans apply online, it is important to measure your credit capacity first. You have to estimate the net income of your business and decide the EMI amount that you can easily and affordably pay. You can also take the help of an EMI calculator to get an overall idea. Figure out how much time you need to pay off the loan, and understand the repayment terms.

Knowing the repayment terms and conditions, you would know whether a particular type of loan or financing source fits your requirements. You may not think it is serious to take the repayment terms, but in the grander scheme of things, it is important to consider all possibilities. Taking care of this small detail, you can save lakhs of rupees in the long run.

Consider the Fees and Charges

For obtaining a business loan, consider the various charges besides the interest rate of the loan. Some lenders may ask for certain charges such as application fees, or processing fees, while others don’t. The charges amount and type vary from lender to lender. There could be collateral appraisal costs in case you are giving collateral for the loan, or there could be charges to conduct your credit assessment.

It is important to know all the charges involved in the loan, as this affects the overall cost of the loan. Go for the lender that asks for minimal documentation, fewer charges, and a seamless loan application process.

The Requirement for Collateral

In case you have assets to pledge as collateral, then you find lenders that provide secured business loans. But if you don’t have any collateral to give, you can still find lenders that provide unsecured business loans. Most of the time, lenders ask for collateral to back up your business loan to avoid the risk of a payment default.

 Know that in case you default on payment, the lenders hold the right to collect the collateral pledged. So first know whether you can or cannot provide collateral, and search the lenders or loan options for a business loan accordingly.

Loan Disbursal Time

Different lending institutions have the varied loan disbursal times. Some disburse the loan amount on the same day to your account, while others may take days or weeks. For instance, a working capital loan can take around 2-5 days to disburse. So, if you are in hurry, and want quick funding for your business, then you can apply for business loans online. There are various online loan options where you can get your business loan approved and processed in an effortless manner. So go for such quick online loan providers if you want fast loan disbursals.

Take Time to Research

Getting approved for an instant business loan may seem like a never-ending process, and it may take a lot of time. But if you have the time, then it is better to move ahead with the process slowly so you do not make any mistakes. Taking enough time and researching the lenders will enable you to explore as many options.

This way it would be easier to find the best deal to get your business loan. Otherwise, if you hastily pick any lender to get a business loan, then you may regret it later when you see other better options coming to the table. So be diligent when searching for the best loans and only select a loan provider once you are assured that they are the best option.

At Lasth

After understanding the type of small business loans, knowing your credit score, business health, and other loan terms, it is easier to find a loan option or an online lender that best fits your business requirements. If you are still not sure how to go about taking a business loan or choosing a lender, contact Rupeezo.

We are a leading financial institution in touch with various loan providers around India. With our expertise, we can help you provide the best solutions for a business loan apply online that are the perfect fit for your current financial condition or business needs.

Get your Instant Business Loan Online Now!