Applying for a business loan for your startup? Read this!
Acquiring capital for your startup or small-scale business is similar to setting up the foundation of your new house. Everything that follows eventually is due to the choices you made during the initial stages. As it is hard to build a house on a weak foundation, it is equally not possible to run a successful company built on an unreliable financial foundation. This is wherein the role of relevant startup business loan comes in.
As the Startup India Campaign was unfolded in 2015 by the Government of India, the number of corporate startups along with modern-age MSMEs (Micro, Small, and Medium Enterprises) have increased significantly. This helps helped in the creation of increased job opportunities -contributing to the overall growth of the country’s economy while minimizing unemployment to a major extent. In addition to this, the Startup India Campaign has also accelerated both non-banking and banking institutions by supporting startups with business loans.
Startup business loans are available at convenient rates of interest towards helping startup owners repay the loan amount easily. Irrespective of the scale and size of the business, capital remains of utmost importance. Therefore, taking up reliable startup business loans can support your company in the long run.
Factors to Consider Before Applying for Startup Business Loan
Before you apply for a startup business loan, there are specific factors to consider to maximize the overall benefits. Applying for a startup loan for starting your new business can appear to be a risky affair. In addition to this, as you are a business owner, you should plan on allocating and using the money in the right manner, the right repayment tenure for your business, and other aspects.
If you wish to apply for a startup business loan in a hassle-free manner, here are some important factors to consider:
- Specify the Loan Amount Needed: When you are applying for the loan amount, you can consider applying for the amount that is slightly above the limit you need. However, it is subsequently recommended to not go over the limit while applying for the startup business loan. When you have access to extra capital, it can help your business in several ways. Still, you need to keep in mind that the respective interest rates will also be higher.
It is recommended to determine the right loan amount you require before applying for a business loan. Plan out all possible expenses for your business -right from the workforce to transportation, miscellaneous expenses, and so more. Once you have an idea of the overall expenses in hand, you can get an insight into the desired loan amount.
- Search for the Best Financial Corporations: In India, you can get access to both non-banking as well as banking institutions offering access to startup business loans. However, it is important to note that every corporation will feature its own set of interest rates, repayment tenure, specific loan schemes, and much more.
While applying for a loan, it is crucial to make sure that you choose a financial corporation to suit your preferences and specific needs. For instance, you can get access to business loans for small businesses and startups at the best interest rates along with impressive offers, great schemes, lucrative repayment options, and flexible repayment tenure.
- Go Through Your Credit Score: The credit score of your business serves as one of the most important parameters you are expected to look into before applying for the business loan for
your startup. The credit score is available as a 3-digit number that helps in explaining the overall credit merit of an individual or business taking up the loan.
If you already have loans under your name before or you have ongoing credit card bills, ensure whether or not repayment was done on time. When you have access to a decent credit score (usually 700 or above), it will improve your chances of getting approval for your startup business loan application.
Raising capital for your startup out of government funding opportunities or loans can be difficult -especially when you are starting out. If you wish to be free from all hassles of a loan application, you can opt for revenue-based financing. The best part is that revenue-based financing can help your startup to avoid equity dilution as well.