It is usual for businesses to experience a shortfall of cash from time to time. This is especially true for new and small companies, which lack significant capital as well as turnover. Availing of a small business loan in India can be an excellent means to fund your company and help it prosper. While many might consider such external funding options, it is probable for them to feel intimidated to approach a lender given the numerous hearsays surrounding such a form of credit.
Good news is most of such sayings do not hold true anymore. If you are one of the first time borrowers contemplating a commercial loan due to any of the following rumors, consider moving past it.
Top 5 small business loan myths
Following is a list of the top 5 myths surrounding small business loan in India that you do not need to pay heed to anymore.
Myth 1: Big-ticket loans are harder to acquire
Most start-ups and small enterprises lack significant assets and revenue, which has led to a widespread belief that such business owners might not be able to borrow large sums. On the contrary, lending institutions prefer investing in large loan amounts, since these are more profitable for them in the long run.
Another myth related to loan size is that financial institutions do not approve small loan requests. While that might be partially true for specific lenders, there are several other microloan options, specially created for short-term business funding requirement. Whichever be your preference, make sure to opt for the exact amount you require. One of the best tips to ensure that your business loan doesn’t pinch your budget is tracking your cash flow to determine the amount you can repay without difficulty.
Myth 2: You must have a spotless CIBIL score to avail funds
One of the biggest concerns for most borrowers is their credit score. While it is true that certain financial institutions demand a healthy CIBIL score to approve funds that is not the case with all loan providers. There are a number of other funding options available via which you can avail of financial aid even with a mediocre credit score. Also, a lot depends on the type of credit you are seeking. You can get a small business loan in India with a lower CIBIL score as well if you fulfil all the other eligibility requirements. However, it is advisable you try boosting your credit history gradually for more extensive fund requirements.
Myth 3: Interest plays the most significant role in choosing a lender
It is quite normal for loan-seekers to concentrate only on interest rates while opting for loan schemes. Although business loan rates do play a significant role in deciding borrowing cost and a loan’s overall viability, there is a hoard of other information you need to apply for a business loan. These include repayment tenor, processing fees, additional benefits like a top-up loan, prepayment fees and other charges. Go for the most suitable scheme only after examining all these features besides interest rates.
Myth 4: You cannot avail of a small business loan in India without collateral
A significant hindrance for most small businesses is a lack of assets. However, contrary to popular belief, that does not mean they cannot avail external funding. Nowadays, there are numerous unsecured business loans schemes and subsidies offered by public and private institutions. Some government-aided schemes, especially for MSMEs include MUDRA Yojana, CLCSS scheme, NSIC subsidy, and CGTMSE scheme.
Small business owners can also opt for collateral-free commercial finance from leading NBFCs like Bajaj Finserv. Such financial institutions offer instant business loan up to Rs. 45 lakh with an easy online application and same-day approval.
Borrowers can further speed up loan applications via pre-approved offers, which are available on business loans, personal loans and more. You can provide your name and contact details to check your pre-approved offer before applying.
Myth 5: Lenders do not offer funds to start a business
Another persistent rumour happens to be that individuals cannot avail loans to start a new business. A long business vintage, great credit score and financial track record might make it easy to get business finance. However, that does not nullify your chances of availing small business loan in India to start a company, which is proved by several government schemes initiated to cater to such needs.
The primary message is, there is always a way out notwithstanding the size of your business. The wise thing to do is conduct research, know your business requirements thoroughly, and try your best to get the funding needed, instead of letting rumours decide it for you.