Every business needs capital infusion. The requirement and the purpose for it may differ but all business is reliant on access to capital and liquidity. Business loans are one of the most measured and effective ways to deal with any liquidity problem, your business is facing.
So, if you are looking for a business loan then these ten questions must have cropped up in your mind as well. Here is a list of ten essential questions you must ask before taking a loan. Have a look on it:
Question Borrower Must Ask Before Getting Business Loan:
- Be specific with the amount you want:Assuredly, people just say they need a business loan in India but fail to decide how much they want? Thinking about any random amount might drag you into the problems. If you need a loan, then think of an amount that you feel can be paid out by your growth; otherwise, it is all in vain.
- Minimum requirements to qualify for a loan:Did you ask your lender about all the criteria they have for the loan application? It is essential to know about all the sets of information regarding the loan because different investors have different approaches for serving the loan, so check that well.
- Which type of loan I want, and which one am I going to get:There are four types of loan- short term alternative loans, SBA loan, term loan, and line of credit. It is advisable to learn the differences between the four of them.
- Short term alternative loans:If you need immediate cash, then you must choose the short term alternative loans. In this type of loan, the processing time is rapid, and so is the repayment time. If you feel you need the money right away and can pay that out soon, then you can choose it.
- What will be the interest rate/ APR:Know about the interest rate charged by the bank account. Some companies only charge AIR (Annual Interest Rate) or APR (Annual Percentage Rate). Knowing the APR is essential to get an exact idea about the amount you will be paying back. Mostly the loans for a small span and amount have higher APR than the longer ones.
- What will be the payment span or tenure:Even if you are paying back the amount annually or monthly, in either case, it is essential that you know the payment dates to judge if they are feasible for you or not. It might be like you get your payments by the 15th of every month, but the date of paying back is on the 1st; this may come up as a concern, so clarify it.
- Will, the lender, do hard pull or soft pullover your credit record: Your credit profile is not shown, and neither does it leave any negative impact on your credit records. Many lenders judge your creditworthiness, so beware of it. Remember to check if the lender is going to do soft pull or hard pull on you.
- How long will it take to process the loan request: Some lenders have a more protracted process for giving you a loan and may drag it longer, and few can provide it sooner. Most smaller loan amounts are processed faster.
- The actual cost of the loan: Knowing the APR, AIR, or the monthly installments in every case and calculating what you will be paying at the end will give you a rough idea about the total amount you need to pay, which includes the principal and undivided interest.
- Do you have a backup plan:At times it may get difficult or challenging in repaying the amount. And in that case, there is one thing you must have: a backup plan. You should show your backup plan to the lender to build your trustworthiness.
Some people require a loan to bring themselves back from the pit, and some may need it to expand and grow the business further. But for approval of the loan you must qualify the business loan eligibility criteria. These are a few questions that you must analyze or go through before taking a loan.