When the expenses are skyrocketing, it becomes difficult for most people to start their own business; the fear of failure or not meeting the target always looms behind. But small business loans have made it easy for new entrepreneurs to achieve their dream with maximum ease. Moreover, people for eons have been under the misconception that only large business houses will be offered loans. These misconceptions are erased from the people’s minds, so this article informs the mass about the new upcoming small business loan schemes that will benefit the startups immensely.
THE SYSTEM
- Small business loans- first and foremost, the idea that the banks and NBFCs only offer loans to big branded companies have to be erased. The bank usually approves big companies’ loans faster due to the colossal amount, which in turn solidifies huge interest amounts as well. But that does not mean the institutions, be it a bank or NBFCs like Muthoot FinCorp, shuns the small business houses from seeking loans. The institution provides small business loans, and the approval process is faster than ever before.
- Credit history- it has been believed that the person who is applying for a loan will have to have a clear credit history. To a certain extent, a clean record of the applier will increase the percentage of approval, but that does not mean only people who have a clean credit history can apply for loans. People who have a topsy-turvy one can apply for loans as well, and they will not be discriminated against the people who have a clean slate.
- In the previous time, collateral was important to have a collateral asset promised to the institution that is financing the loan. But that puts the small business owner in a tight spot because he decided to take up the loan because of the monetary crisis. But in recent times, this is not applicable.
Most of the institutions that are financing small business loans are doing it with any collateral offer such as unsecured business loans, unsecured business lines of credit, merchant cash advances, and business credit cards. The lender might request the applicant to give a personal guarantee, which states that the dues will be given and cleared by the given time. Other than that, other collateral offers are required to get the loan approval.
- Repayment- the repayment clauses swings in favor of the customers more than the lenders. For one, the most important change that they made was giving loans based on income and not based on assets as done by the banks. The applier will be given enough time to repay the principal amount along with interest. Hence, contrary to popular belief, the person applying for the loan will be given enough time to repay the institution and not get cheated.
- Documents- the documents that are to be provided are less than the documents that must be shown when opting through a bank. The instructions that are provided in the form are quite easy to decipher. Unlike bank loans, this process is not time-consuming and is completed with even any minor hassle. So, the customer needs to get rid of their preconceived notion that it takes a lot of time to do the paperwork.
- EMI Calculator- EMI calculator has been observed to be useful for the customers who need to plan ahead before applying for a loan. This digitally calculates the loan amount, interest rate, and principal amount to bring out the payable EMI amount and payable interest amount. This helps the people to plan ahead of time and properly distribute their assets.
THE ELIGIBILITY CRITERIA
- Age- the age of the applicant should be between 21 years to 65 years of age.
- Term – the person applying for the loan must have a small business for at least two years.
- Bank Account- must have an operational bank account.
- It is necessary to have a co-applicant.
- The ideal CIBIL score, that is, 600, is required to seek a sme loans india.
CONCLUSION
Small business loans are extremely beneficial to the people who are just starting and help them manage their expenses properly. They are also now easily available because of various NBFCs in the market.
