Under-capitalization or cash-strapped business can make a business’ future look bleak- and could also become one of the main reasons of a business failure. Entrepreneurs can make the best out of these worst situations by resorting to Business Loans. In most cases, you’ll need to borrow to get the necessary funds for your purchase or expansion. If you are rushing to sign on the dotted line of a business loan, do read the common mistakes business owners make while doing so. We promise you won’t regret after reading this.
1. ‘I didn’t read and understand the terms carefully before signing’
Not reading the business loan terms carefully before signing is a big mistake. The terms and conditions, also called TnC, tells you what is expected of you as a borrower. It will contain details about all fines, penalties, etc. Often TnC are quiet voluminous and boring. In your haste to get a loan, you may commit to things that can cost you a fortune. So, don’t jump the gun and sign papers without reading the details and terms of the loan. Ask questions about things you do not understand.
2. ‘I am applying for multiple loans simultaneously’
Some business loan seekers make a mistake of applying for multiple business loans at the same time. They seem to think that multiple applications can boost their chances of getting at least one loan. The actual effect of applying for multiple business loans is not at all prudent. Lenders interpret this kind of behavior as the borrower being credit-hungry and your precious credit score gets a hit. Simple eligibility and documentation make business loans quite convenient.
3. ‘I waited for the cheapest loan offer and so let go of the best one’
Everybody wants to pay the cheapest EMI. But, cheap is not necessarily the best for you. More often than not, falling into the ‘low EMI’ trap, could lead to situations where you get a cheap business loan, but the servicing may be awful. You should consider the entire process, servicing, track-record, and other factors before selecting the lending institution. Tata Capital is always there to meet your collateral-free personalized business loan requirements at competitive rates without bothering you with too many formalities.
4. ‘I did not take the right business loan, right EMI product’
The saying “One size does not fit all” goes very well when choosing for a Business Loan. There are different types of business loans for different needs. If you take a Business Loan that is not the best fit, it can be problematic. A term loan is not as same as a working capital loan. Term business loans can be of tenure for 3 to 15 years, while a working capital loan is for meeting your daily business needs. Similarly, taking the right EMI product is very important. You may want to pay EMI amounts in a particular way, but if you are not careful you may have taken a standard EMI option. For instance, Tata Capital gives you the option and convenience to customize your monthly business loan repayment instalment (flexi EMI or structured EMI). So, the EMIs you pay are best-suited for your company’s cash flow situation.
Yes, you need a business loan on an immediate basis. However, taking a little time to do your due diligence can help you avoid in making some of the most over-sighted and common mistakes while availing a business loan.