3 Dos and Don’ts for First-Time Business Loan Applicants

The start-up economy has found roots in India, and everyone can confirm having at least one small business owner in their acquaintance. As the number of MSMEs are increasing across the country, so is the need for adequate business financing opportunities. Consequently, B2B lending platforms have risen to prominence, giving competition to traditional banks in the area of business finance. New business owners usually have some amount of hesitation while making credit decisions. This article has listed three primary dos and don’ts for those budding entrepreneurs who are applying for a business loan for the first time in their lives.

THE DOS

1. Prepare a Budget 

You must have a detailed list of business expenses to be made from your loaned amount, with relevant reference to substantiate the numbers on your budget. This way you can prevent making any arbitrary decisions when you eventually have the credit in your hands. 

2. Have a Repayment Plan 

No lender will want to throw money into what seems like a risky investment so be sure to have a well-drafted plan on what you want to use your loan amount for and how it will ensure good returns. You are more likely to get good deals when the lender has confidence in your vision and objectives. 

3. Choose Your Lender Wisely 

Conduct a thorough research on the B2B lending opportunities available in the market, including both banks as well as non-bank financial companies. Compare them all on the basis of interest rates, loan tenures, EMI options and other important terms and conditions. Then pick the lender whose loan scheme is most suited for your business needs. 

THE DON’TS 

1. Apply for an Unnecessarily High Amount 

While it is understandable for business owners to want some extra credit in their hands for unforeseen situations, it is advisable to keep that ‘extra amount’ in your business loan within a limit. Applying for loan amounts that you don’t actually require can take a negative toll on your monthly cash flow in the form of high EMIs. 

2. Focus solely on Interest Rates

Most new business owners make a mistake here. While scouting for a loan scheme with a lower rate of interest, they usually overlook other important details like the documentation required, the applicant process, the loan sanction and disbursement procedure, any hidden charges involved, etc. An online B2B payment platform usually provides better deals than banks, on the above-mentioned fronts.  

3. Be in a Rush to Repay

Though it is best to clear debts as soon as possible, don’t prioritise loan repayment at your own cost. Pulling out funds while your business is still in its incubation phase increases the risk of a financial crisis should your business take a hit in the near future. It is always best to hold repayments till your business has generated enough revenue to get you through a low. This is, of course, only valid for those that have the liberty of such a choice in their loan repayments.   

Knowing these important dos and don’ts can help first-timers reap the full benefits of their business loans. EMBIFI is an online B2B payment platform, providing seamless checkout, financing, lending and payments options to businesses. Contact team Embifi and enjoy the supply of hassle-free credit for all your business needs.