10 Things To Consider When You Take A Business Loan | Letzbank

While every bank or financial institution has their own take on what’s acceptable to their business loan eligibility, here are some tips that are in general practices by all.

    Most Banks Ask For Collateral– Whether you are a start-up or a mid-sized business, you will perhaps need to submit a collateral to get that business loan. Plan ahead of what assets you can serve as a collateral to the bank and determine whether you are willing to pledge your personal belongings such as house, property, etc. as collateral.

   Keep A Detailed Business Plan Ready –Banks will grill you a lot on profitability of your business and it is very crucial that you have a detailed business plan in place that can support your need for a business loan. Keep a good check of your product, be confident of your future goals and provide a clear picture of your business goals through numbers, data and other tools.

    Maintain Your Financial Records – Keeping a detailed record of all your financials including any previous debts, bank account information, all the information of investments, tax information, etc. is highly crucial. Get counselling from your CA to ensure that all financial data is up to date and to always ensure that you are running making profits.  

   Ensure Good Credit – Banks will rely on your credit report to check your borrowing history and ascertain your credit ability. Any defaults on payments could result in your loan getting rejected. It is also important to keep a check on your credit report prior to applying for business loan to ensure that any discrepancies can be duly corrected.

   Borrow Only What You Can Realistically Repay – One of the most common mistakes that borrowers make is taking more loan than what they actually require.Take the realistic approach and lend only what is sufficient for your business and don't be tempted by more as repaying with interest will cost you.

   Keep A Shorter Tenure – A longer tenure may reap you the benefit of flexibility in repayment and more time that you can get to arrange for repayment, keeping a shorter tenure, however, will save you on the hefty interest rates that the bank will charge. When you find an increase in profits, try to increase your monthly EMI so that you are able to repay faster.

    Don't Use A Business Loan To Invest –As a basic principle of investment, one should not take a loan to start an investment. Borrowing money for an investment is highly unsafe.

    Get Insured –Getting yourself covered against unforeseen circumstances such as sudden death or prolonged illness can protect you and your family from non-payment. A term insurance for the business loan can help you get covered.

    Familiarize Yourself With All Charges –Before you sign the loan agreement, make inquiries regarding the different fees and charges levied by the bank. Whether they have any pre or part payment facility or any penalties for non-payment or late payment.

   Terms and Conditions – Do ensure that you read the entire loan agreement terms and conditions prior to signing the loan and do a due diligence at the time of submitting your application. There may be hidden fees and charges involved that the bank may not have disclosed to you and that can be verified on the loan agreement. 

      We at Letzbank remain sanguine that we will make all efforts to guide you that you make the right decisions and help you in that hour of need. We want to keep up the goodwill of our customers - because we value our relationship with you.