As more and more women have begun starting and growing their businesses, it becomes important to look into the various business financing options available to women. Many banks and financial institutions in India offer special interest rates to women and business loans for women, particularly women that are looking to start their own business or looking to grow their business.
The government of India has also put in place certain subsidies and concessions to help empower women in the business sector.
Growing a business is no easy task and oftentimes, we might not have the funds required to start or grow a business. This is when business loans can be of help. Business loans are loans that are geared towards helping business owners achieve their business goals. Business loans are generally unsecured loans, which means you don’t have to worry about pledging any collateral.
You can use your business loan for a number of different business needs such as:
- Purchasing or renting land for office or manufacturing units
- Advertisement and marketing expenses
- Paying loans and other debts
- Funding the purchase of applications and licences
- Hiring and training employees
- Employee welfare expenses
- Purchasing equipment and tools
- Expansion and renovation expenses
There are some eligibility criteria that you would need to meet in order to qualify for a business loan in India. Here’s the business loan eligibility criteria (bear in mind that the eligibility criteria can change depending on the lender you choose):
- You must be an Indian citizen
- Your business must’ve been functional for at least 3 years
- You must be between the ages of of 21 and 60
Though business loans can help you take your business to the next level, it’s important to understand these loans well and make an informed decision. Here are some factors to keep in mind while availing a business loan:
Credit Score
Though a business loan is taken out on the behalf of a business, the individual applicant’s credit score is considered by lenders while determining the loan amount, interest rates and other terms. This is why it’s advisable to build your credit score and then go for a business loan as this will give an advantage while availing a business loan. Generally, people with relatively higher credit scores are given a preference while availing a loan. Hence, people with higher credit scores find it easier to get loans. Moreover, if you have a higher credit score, it also gives you an edge over other borrowers, meaning you can negotiate better.
Interest Rates
When you’re growing your business, it’s important to keep costs low so that you can grow sustainably. Your loan EMIs might be one of biggest monthly, recurring expenses, this is why it becomes crucial that you keep the EMI cost as low as possible. In order to do this, you can opt for lenders that offer lower interest rates or if you have a good relationship with your lender, you can try negotiating the interest rates down.
Flexible Repayment Options
If you expect your business to grow drastically, then it might be a good idea to consider lenders that offer flexible repayment options. This way, if you wish to contribute more to your EMI after your income has increased, you can do so. You can also choose to foreclose your loan in the future if you choose a lender that allows foreclosures.
Don’t apply for business loans with multiple lenders
When you apply for a business loan, or any loan for that matter, the lender will approach a credit ranking agency to ascertain whether or not you are a creditworthy borrower. The credit ranking agency will assess your credit history and send a report to the lender, this is known as a hard enquiry. When you apply for a business loan with multiple lenders within a short period of time, multiple hard enquiries will be conducted against you. This will have an adverse impact on your credit score as this shows that you are desperate for credit. Instead, compare and contrast lenders’ rates and terms, shortlist the suitable one and apply for that. Also bear in mind that loan application rejections can also negatively affect credit score.
Loan Tenure
Loan tenure or repayment period is another crucial factor when it comes to business loans. The loan tenure becomes particularly important if you’re going for a loan option that does not come with flexible repayment options. If your loan tenure is too long, then you run the risk of paying too much in interest whereas if your loan tenure is too short, then your EMIs can become a burden. This is why you should always take your financial obligations into consideration while choosing your loan tenure. Factor in all your business expenses and choose a loan tenure that is affordable and sustainable for.
Choose a Trusted Lender
When it comes to your business’ finances, it’s important to be safe and exercise caution. Loans are a big commitment and involve a lot of money, this is why you should choose a lender that you trust. You can either choose a lender that you already have a relationship with or you can choose one that has a good reputation.
As more and more women have chosen to enter the business world, it’s important to empower them with the tools they need to succeed. One such tool is a business loan. A business loan can help you achieve your business goals and take your business to new heights!
