Common Mistakes to Avoid While Availing a Business Loan
The tough economic conditions brought on by the COVID-19 pandemic may require many to take business loans to support their dream projects. Today, many companies offer business financing at reasonable interest rates and convenient EMI plans, making capital borrowing much easier for businesses. The tenure for a secured business loan is 15 to 20 years, while it is 1 to 5 years for unsecured loans. Interest on such loans range from 14% to 22%.
Go through some mistakes you should avoid when taking a loan for business.
Mistakes to avoid while availing a business loan
1. Not reading terms and conditions carefully
All loans, insurances, mutual funds come with some terms and conditions. It’s always advisable to go through them before signing any paper. T&C can be boring and lengthy to go through word-by-word, but it’s better safe than sorry. Therefore, next time while signing up for a business loan, make sure you don’t jump to conclusions and sign the papers. Instead, read the fine print carefully.
2. Applying for multiple loans simultaneously
Sometimes borrowers apply for multiple business loans online at the same time. It may seem like you have a higher chance of getting a loan, but in reality, you’re just creating a bad image in front of lenders. This behavior makes you look credit-hungry and affects your credit score.
3. Confusing cheapest online business loan offer as the best
Everybody wants their business financing to have the cheapest EMIs, but a cheap product is not always the best option in the market. Hence, avoid falling into the trap of cheap business loans. Instead, do your research, consider all the factors like interest rates, servicing, eligibility, etc., and then choose the best plan that suits your requirements.
4. Availing a loan when financially unstable
Some wait until they are in the worst possible situation before asking for help. In the case of business loans, strictly avoid this practice. Plan your financial position; know how much loan you require, where you would use the money, and when and how you will repay the funds. Do not wait for your pocket to go empty. Instead, be prepared and plan your loans accordingly.
5. Not choosing the right lender
There are multiple business financing options available in India. Choosing your perfect lender can be a bit of a hassle, but not doing your research can cost you later. Opting for a good lender is necessary as they will offer you money and provide your business with proper attention and resources.
6. Not considering your credit score
It’s quite important to consider your credit score while you are looking for a business loan. It defines your eligibility criteria and helps the lenders assess whether or not a loan should be given to you. It also determines the extent of the loan, which can be provided to you.
Process to avail and apply for business loan has become easier. For getting approval in one shot, you need to take care of the above factors, have proper documentation, and provide proper business financial documents to lenders. This will help you in availing business loan as per your requirement.