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Tips to Ensure That Your Business Loan Doesn’t Pinch Your Budget

  • Highlights

  • Why planning loan repayment is important

  • How to plan for an affordable loan

  • How to plan for loan repayment

  • The advantages of a Flexi loan facility

While external finances can supplement your working capital needs, machinery purchase or expansion activities, keep in mind that every loan needs to be repaid in a timely manner.
Planning in advance and doing your research is the key to taking a business loan that not only benefits your business, but also proves to be affordable and convenient to repay.
Here are some pointers to help you take a business loan that is as effective as it is useful.

Select a lender that offers online application

Study the Business Loans offered in the market in detail before applying for one. You will come across several lenders. Compare all the available loans based on their cost and features. Things to watch out for are the interest rate, all additional charges, Flexi Loan account facility, quick approval and disbursal timeline. But, most importantly, pick a lender that offers online application and loan management facilities. This will ensure that you don’t have to visit the branch during application and over the course of your repayment tenor.

You can easily apply for the loan from the convenience of your home or office. For example, if you run a computer repair business, you don’t want to spend business hours shuttling to and from the loan provider’s branch. This could cost you time and money. More importantly, online loans offer the most competitive interest rates, which will make the loan more affordable for you.

Choose a fixed interest rate over a variable one

Loans are given with two types of interest rates: fixed and floating (or variable). These can be indistinguishable at times because of the way that they are presented. Picking a variable rate means that your interest rate will be dependent on market forces and may fluctuate. Fixed interest rates, on the other hand, do not change over time. This makes planning your EMIs easier to ensure that your repayment is timely. For a short-term business loan, which is usually offered for a maximum tenor of five years, a fixed rate is a preferred option. For example, if you have a small computer repair business with only a handful of employees, knowing the total cost of your loan is imperative. There’s no room for uncertainty as missing an EMI payment leads to EMI bounce charges and penal interest. So, when you need to know the total cost of taking external finance, a fixed rate of interest is the best one to choose.

Plan your repayment in advance

Small business owners may find themselves borrowing another loan to pay off a previous one. To keep yourself from experiencing the same hassle, choose the loan tenor wisely and plan your finances in advance. One way to think about tenor is about spreading the EMIs into affordable instalments to pay off the loan easily. Sometimes, picking a longer tenor is ideal as the EMI will be lower. On the contrary, if you want to quickly rid yourself of the financial obligation, pick a short tenor and pay less interest on your loan. You can also choose your tenor based on when you expect your business to generate enough revenue to pay off your loan. Apart from this, it is also a good idea to start a cash reserve or a savings account to repay your loan. One way to also plan repayment in advance is by listing all the investments that you have made, and checking if there are any returns that you can use to repay the loan. This will help you to make timely repayments and avoid extra expenses in the form of late payment charges.

Additional Read: How To Run a Successful Personal Service Business

How To Get Small Business Finance From Bajaj Finserv

Dos and Don’ts when applying for a Business Loan

Business loans from Bajaj Finserv are designed specially to help growing businesses meet their financial requirements. Easy to apply for and hassle-free to avail, these loans come with several unique benefits that make them the ideal mode of business finance for small and medium sized enterprises. However, when applying for a business loan, there are certain dos and don’ts that you should keep in mind, in order to ensure that your application is processed smoothly. Here, we tell you what they are.

Dos and Don’ts when applying for a Business Loan

Enquire about prepayment and other charges

Many lenders levy penalties over foreclosure and part-prepayment. These charges can be almost 4–6% of the loan amount, making it an expensive proposition. Hence, before applying for a loan you should make it a point to check for a loan that has the least charges if you want to foreclose it before the end of the tenor, or make prepayments to lower your interest burden. Also ensure that you know the exact value of charges like processing fees, secure fees and more. This will help you choose a loan that matches your business revenue.


Additional Read: The Hidden Costs Involved In Running a Business

Opt for a Flexi Loan when you have irregular expenses

If you are unsure of how much finance you will need, pick a Flexi business Loan rather than a term loan. Some lenders offer this convenient option, which allows you to withdraw and repay money from a loan limit, as many times as you wish to. The advantage here is that you only have to pay interest on the amount used rather than the total amount sanctioned. This option also lets you pay the principal component at the lapse of the tenor and pay EMIs comprising only the interest, should you wish to. For example, if you are diversifying from repairing laptops to also servicing mobile phones, you will need to hire specialists, maintain inventory for commonly used parts and also buy the necessary tools and software. To meet these expenses as and when they crop up, a Flexi Loan is ideal.

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