Want to boost your online business presence? Or open a new branch? Well, whatever your business goals are, a loan can make it happen for you. With that said, you also need to consider the various conditions that come along with a loan, from credit score to collateral requirements.
To ensure you get a sweet deal, ask yourself the following ten questions before applying for a loan.
Q1. How much should I borrow?
Do you have a definite goal in mind? If yes, you should only borrow a loan amount sufficient to realise it. If not, think of one and apply accordingly. Doing so will help you avoid overborrowing.
Q2. What does my credit history look like?
Your credit history plays a vital role in your business loan eligibility and also the interest you’ll pay. So before you apply, make sure your credit report is updated and error-free.
Q3. What tenure should I opt for?
The shorter the tenure, the higher are your EMIs. However, it also means you can pay off the debt just as fast. The best way to decide? Use an EMI calculator and check the best possible combination of loan amount and tenure for yourself.
Additional Read: Why should you apply for a small business loan?
Q4. Do I need to pledge collateral?
Yes, but only if you’re borrowing a secured loan! You don’t need to provide any security for unsecured business finance. So, which one should you choose? Though it seems like a tough choice to make, you can compare business loan interest ratesand other terms you’re getting on the two loans and decide accordingly.
Q5. Do I need a co-signer?
You can add a co-signer to your loan if you wish to divide the burden. Also, if you’re running a business in a partnership, your partners may need to sign the loan. Besides, you can also add a co-signer to improve your loan eligibility.
Q6. How can I use the loan?
There are no hard-and-fast rules on how to use business finance. Whether it’s hiring new staff or financing new software for operations, it can cover every cost.
For instance, having an online presence for small businesseshas become a necessity today. So, you can use the loan to hire services from a digital marketing agency and boost your brand awareness online.
Q7. How strong is my business plan?
Most lenders will want to take a look at your business model before disbursing you the loan. They’ll check your revenue, expenses, and other debt obligations. So make sure your business plan is well-thought-out before presenting it to a lender.
Q8. Which lender should I choose?
The best answer to this question is to shop around. Choose a lender that offers a good mix of convenience and affordability. Also, don’t forget to negotiate for a lower rate.
Q9. Am I eligible?
Most lenders require you to have a strong business record for loan approval. However, the criteria may differ across different lenders. Simply go to your preferred lender’s website or connect their representatives over a call to check if you’re eligible.
Q10. What are the additional charges?
Before you sign a business loan deal, make sure to read everything in the fine print thoroughly. Look for prepayment penalties, late payment fees, variable interest rates, grace periods, and what happens if you default on a loan. Doing this will prevent any nasty surprises later on.
Additional Read: 5 Things You Can Fix With a Small Business Loan
Stuck on Question 8? Well, Tata Capital is the correct answer for it! With our affordable and flexible business finance options, you can quickly borrow the required funds for your business. Learn more here.