When it comes to financing your a venture, external debt is often the go-to funding option that businesses look for. And rightly so, as these loans come with attractive features which makes them favourable for borrowers. Under external debt funding, small business loans are advances to look forward to for several reasons. For one, they are affordable and can be repaid in easy EMIs. Further, lenders allows flexible repayment options on these loans so that the borrowing business may choose a suitable option as per its need and financial standing.
When selecting a financial institution to borrow the funds from, one must, however, ensure to be well-informed of the common loan details like the range of interest rate levy, feature suitability, and such other aspects. Keeping these requirements in perspective, we have collated a handful of common features of small business loans from some best lending institutions in the market offer.
Small Business Loan Features to Look Out For When Borrowing
1. Financing value of high quantum:
Small business loans, even though considerably smaller than long-term finances, are sufficient to meet big-ticket funding needs of a business to be invested for a period of a few years, say 5 to 6 years. Businesses fulfilling all eligibility parameters laid down by the financial institution can secure funding of up to Rs.25 Lakh without much hassle.
2. Line of credit availability:
A business may need periodic funding to meet some of its recurring expenses. The line of credit facility under these business loans allows borrowers to make multiple withdrawals from a pre-sanctioned loan value to fulfil such recurring expense. Lenders also charge interest on the used amount only, which keeps the loan affordable too.
3. Competitive and affordable rates of interest:
Another aspect of affordability accompanying these advances is the levy of competitive business loan interest rates. Lenders provide these loans at attractive rates keeping in mind the promotion of growth and development among small businesses. Financing for small business is also available under various government-backed schemes that provide interest subsidy to borrowers.
4. Prepayment options with low to no cost:
When meeting the loan liability, a borrowing business can choose to prepay the loan at any time before the tenure’s end through a part-prepayment or foreclosure facility. Lenders provide these facilities to borrowers at minimal charges, which ultimately allows them to save on the total interest payable on the total loan liability otherwise.
5. Flexible tenures for repayment:
Lenders also offer sufficient flexibility in the choice of repayment tenure. It means that depending on the borrower’s eligibility for the loan, he/she can choose a tenure that fits suitably for repayment as per his/her business’s financial standing. The maximum tenure for these loans can go up to 5 years with the best financiers, which is suitable for convenient repayment for the advance.
6. Easy EMIs:
Repayment of these small business loans is doable in EMIs, whereby the instalments are determined based on the loan amount and tenure selected as well as the interest rate applied. A cautious choice of tenure and loan amount can combine to ensure you repay your loan in easy EMIs. Use a business loan EMI calculator to adequately weight your borrowing amount and tenure suitability.
7. Balance transfer facility:
Some best lending institutions in the market also offer balance transfer facility on these loans. It allows a borrower to transfer their outstanding loan principal from existing lender to a new lender offering better rates for repayment. Along with interest rate, the new lender may offer other favourable terms of service too. Thankfully, these small business loans are designed as such to ensure availability of financing for all business expenses. So, irrespective of whether you seek the loan to meet working capital requirements of your business or to buy asset for long-term use, or even to make payments to workers, a business loan fits just right.
However, it is advisable to not to choose the longest tenure for the repayment of your business loan, even though available, because it may unnecessarily stretch the interest accumulation on the advance, costing the loan dearer. And while you can repay it earlier with a healthier financial standing, it is best to choose higher EMIs than longer tenures for repayment.