Top Factors To Consider While Comparing Business Loan Lenders

Businessmen need funds to establish their businesses. Once their business is established also, they need working capital for expansion, sales, day-to-day operations, and so on. However, if you are a businessman, you need to choose a credible lender to take the business loan. There are several lending institutions - banks, NBFCs, and other private lenders in India offering business loans. Most of them are available online, so it is easier to compare the features of the loans and choose the best lender. The comparison should be done based on various parameters. Here are some of the essential factors to consider while comparing business loan lenders. 

The Reputation of the Lender 

The credibility of the lender is very important before taking a business loan. The following are some of the ways to assess the reputation and credibility of the lender

• The lender should have an official website
• The lender should have a physical address
• Check if the loan terms are clear and transparent
• Browse the official website of the lender
• Look into the lender’s social media channels and check the reviews to make sure that the lender is trustworthy
• Contact acquaintances and friends who have borrowed from the lender and find out if their experience with the lender has been pleasant 

Application Process 

When you choose a business loan, pick one that has a simple and smooth application process. Online lenders often have a seamless application process as compared to traditional lenders. Online lenders have the following benefits

• The entire process can be completed online 
• Minimal paperwork
• Faster loan approvals 
• Useful tools like credit score checkers and EMI calculators

Since the application process can be done completely online, you can get your loan approval instantly. 

Total Cost of the Loan

To get the best business loan, you must compare the charges and total cost levied by various lenders and choose the best-priced business loan. The processing fee, taxation charges, and the interest rate account for the total cost of the loan. The  total cost of the loan should be:

• Fair and reasonable. 
• Affordable to you 
• stated transparently in the agreement

Loan Amount 

Select a lender who can provide you with a sufficient loan amount to fund your business expansion plan. If the loan amount is not enough, the purpose of getting the loan will not be served. Whether you want to promote sales, recruit new hires, refurbish or expand your workplace, or purchase inventory, you need sufficient funds. Compare loan amounts given by lenders first. There will surely be differences in the loan size amongst lenders. Some will give 30 Lakhs while others 75 Lakhs. So, choose the lender who funds you appropriately. 

Flexible Repayment Options

It is essential to repay your loan on time to maintain your creditworthiness. So, choose a lender who offers easy repayment options. The date of EMI is important for certain businesses depending on their salary payment dates and their receipts payment cycle. Nowadays, since lenders provide various options to repay loans, you can choose the repayment option best suited for you.

Interest Rates 

Interest rates play an important role in choosing your business loan. The EMIs and the total cost of the loan are calculated based on your interest rate. If your interest rate is low, then the total cost of the business loan becomes low. The final interest rate offered depends on several factors including 

• Duration of the loan
• Principle amount of the loan
• Credit Score 

Before you apply for a business loan, compare the interest rates offered by different lenders and choose the one who offers the lowest interest rate. To qualify for a business loan with low interest rates, you must improve your credit score before you apply for the loan. Read these quick guidelines on how to improve your credit score 

A comparison of some business loan interest rates for 2022

Payment Process

Most banks and NBFCs have integrated NACH-facilitated transactions. This is a  web-based facility for high volume, electronic transactions, which are of a repetitive nature. This also facilitates transactions between 2 or more banks. This has been implemented by the National Payments Corporation of India (NPCI) to facilitate easy payment for corporates, banks, NBFCs, and the government. Businesses can use this facility to repay their loans instead of cheques since this is easier and faster. This helps in maintaining a record of the payment as well. 

Business Loan Eligibility Criteria 

You should ensure that you meet the eligibility criteria set by the lender before you apply for the business loan. Different lenders will have different business loan qualification requirements, and doing a comparison is essential to get the most suitable loan for you. If you do not meet the eligibility criteria, the chances of your loan getting rejected are high. 

Does the Lender Offer a Collateral Free Business Loan?

Choose a lender who provides a business loan without any collateral. Putting your assets at stake in a business loan may keep you worrying about them. Unsecured business loans are collateral-free, and you can concentrate on your business and related activities without having the pressure of losing your assets. 

Conclusion

The factors listed above are some of the important ones to consider while comparing business loan lenders. However, it may be difficult to find a lender who satisfies all these parameters. Also, getting a business loan will depend on various other factors, such as your credit score, your relationship with the lender, revenue generated by your business, and so on. So, you should compare lenders and choose the business loan best suited to your requirements and the financial health of the business. 

 

FAQS Top Factors to Consider while Comparing Business Loan Lenders

1: Is it essential to consider the quality of customer service done by the lender when you compare lenders for getting your business loan?

Yes, it is essential to choose the lender who offers good customer service. You may need their help at different periods of your loan term. So, the customer representatives should be approachable, professional, trustworthy, and process savvy.

2: What is one of the most essential things that lenders look for in borrowers while approving the business loan?

One of the first things that the lender will assess is the owner’s capacity to repay the loan. This is based on 

• The business revenue
• cash flow
• outstanding debt
•  unused credit lines
• The amount of money the owner has invested into the business personally.

3: How do potential lenders evaluate the business plan?

They evaluate your business plan based on the following parameters. 

• Whom you serve and how large this population is
• Your competitors
• How viable the market is (opportunities for growth, affluence, and so on)
• Unique factors about your business, and how you are going to stand out amongst your competitors