Business Loan Comparison Checklist

 

As business loans are unsecured loans (like personal loans), the interest rate charged on them is normally on the higher side. Hence, you must do everything within your means to carry out a fair comparison between various business loan offers from banks and NBFCs, before finalizing any of them. This comparison must also be carried out based on parameters like the quantum of the loan, disbursal time, repayment time period, offered interest rate, flexibility in documents, processing fees, approval success rate etc.

In essence, this process is very important to arrive at the right loan deal for your business. A deal that not only meets your funding requirements, but also doesn’t put any unwanted financial strain on your business’ bottom line. The lending marketplace in India is overflowing with all kinds of lenders. Carrying out detailed research on each and every lender by going over online and off-line resources can be a very tedious task. At GoSahi, we have made such comparisons extremely easy for you. On our website, you can compare the best business loan offers from various top-rated banking establishments and NBFCs, just by the click of a few buttons.

Let’s take you through some of the important parameters based on which you can compare various business loans:

Let’s briefly go over the comparison parameters below:

As a business loan is normally an unsecured loan, implying that you will not need to provide any collateral for it, the offered interest rate by the banks and NBFCs is higher compared to the secured loans such as a home loan. The interest rate charged is usually fixed in nature and can be anywhere ranging from 14% to 24%. It can sometimes be even higher depending upon the lender and the eligibility criteria. The exact interest rate charged on the business loan will depend on multiple factors such as the amount of loan, applicant’s eligibility, credit score, age of the business, assets and infrastructure, volatility of the industry, tenure of the loan, availability of documents and more. Please note, most of the banking establishments and nonbanking financial corporations use their own specific methods and means for calculation of the interest rate.

The disbursal time for a business loan will vary from one lender to the other. Provided that you have all the documents ready and can submit them in a timely manner, you can expect quick disbursal of the loan. Normally, it takes anywhere from 3 to 5 days for processing the business loan application. The disbursal time can be expedited if you have a good credit history and a high credit score. Furthermore, the lender might not take a lot of time if the loan amount requested is lower than what you are eligible for.

The business loan processing fee is a one-time charge (non-refundable in nature) levied by the bank or financial company at the time of processing your loan application. It could be either a certain percentage, normally varying from 1% to 3% of the sanctioned loan amount, or a pre-specified fixed amount. Please note, some NBFCs and banking establishments might waive this processing fee for you if you have a long-time relationship with them, or as a part of some promotional campaign.

The type and number of documents requested by the lending establishment will vary from lender to lender, and will also depend on how well you meet the eligibility criteria. The exact business loan product you are after will also determine the documents required for it. Regardless, there are some common documents like residence proof, identity proof, age proof, financial documents (audited balance sheet, P & L statement) etc. which are required by all the lenders. It’s important to have the required documents ready before applying for the loan, as it can help in quick approval and disbursal.

The approval success rate is the percentage of submitted business loan applications which are approved by a specific banking establishment or Nonbanking Financial Company. As is evident, the higher is the approval success rate, the better will be your chances of availing a business loan from the concerned lender. You might enjoy quick sanctioning and disbursal of the business loan if you already have a banking relationship with the lender and/or have been offered a preapproved business loan by them.

Like other prominent loan products, business loans are also repaid via equated monthly instalments or EMIs. Lenders will factor in your repayment capacity to determine the tenure of the loan and the monthly EMI. In general, business loan applicants can repay the loan within a time period of 5 years, thus making it a more preferable loan product compared to others.

The quantum of the business loan offered by banks and NBFCs is usually pretty high. You can avail a business loan ranging anywhere from INR 50,000 to 50 lakh, or even higher depending upon your profile and requirements. Having said that, please note, it’s very important for you to make a sound assessment of your funding requirements before submitting a business loan application. It’s best not to borrow more than what is required by your business, as repayment can become quite a hassle if you sail into rough waters later.