If you are a small-business owner you will need a bank loan at one time in your business, and if you want to apply for one involves a lots of hassles other than doing the paperwork and pray everything will be in process. Before you apply for a loan you will need to consider all your personal and business financial state, how do you plan to repay the loan, and the amount you actually need.
Do consider these questions before you start filing for a business loan,
This is the biggest question for entrepreneurs, if you are eligible for a business loan at all. As we all know business is full of uncertainty, ups and downs are part of the game and many a times business owners fail to keep the financials right. By doing this the entrepreneur only hurts their credit score.
If you pass the eligibility criteria it's always important to determine how much money you actually need and is for what purpose. Different businesses have different needs and understanding the monthly structure of money inflows you will have to determine how much you need so that you can pay the dues on time.
There are two types of business loans, one is unsecured and the other one is secured loan where you need to keep collateral to avail the loan. If you have a property which you can keep collateral worth one crore and you only need twenty lakhs as loan it will be suggested to instead go for a personal loan with fair personal loan interest rate. If you keep an expensive collateral and fail to pay your dues on time the bank has the right to confiscate your property.
Make sure you have all the payment terms and deadlines from your creditors on place so that you don't face difficulties while paying your EMIs on time. Many a times what happens is that the party does not pay your money on time, make sure you have backup plans if you don’t have money to pay EMIs on time Pay what you owe to the bank on time so that your credit scores don't get affected.
Many of us know our personal credit score but what about credit score of the business? Before you apply for business loans make sure your business credit score is high enough to get you the best deal available in the market. You will be able to find loans for bad credit but the interest rates will be high.
When you are applying for a loan make sure that you find out if there are any pre closure charges and you can pay the rest of the business loan without any penalty. These are hidden costs which are not disclosed by the banks and they only appear when you are about the close the loan. For some banks the pre closure charges are high and for some are nominal.
Finally, make sure your credit scores has a stand which will play a large part in loan qualification and the terms offered by the bank. It's good to make payments on time and keep your credit scores healthy so that in case of business emergencies you have speedy loan approvals and take care of your business without any hassles.