A Quick Guide to Get Short Term Business Loan

Starting your own business venture is undoubtedly one of the most significant achievements in any individual’s life. After all, you have left the safety net of your job and have ventured into a new realm. You must now manage the various aspects of the business carefully to ensure success.

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Finance is one of the most important aspects for the smooth sailing of business operations. You should, therefore, keep a close watch on the easy availability of cash for your business at all times. In the initial period, you can use your savings or borrow from your family and friends to finance business activities. Though, after the initial funding has been utilised, you may need access to another ready source of finance. Out of the multiple sources of financing available to the business owners from banks & NBFCs, one of the most commonly applied credit lines is Short Term Business Loan.

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What is a Short Term Business Loan?

A Short Term Business Loan is indeed perfect to meet short term financial requirements of a business. These loans are usually unsecured, but based on your credit profile and risk rating, the lender might ask for collateral. The money obtained can be used for business purpose only such as working capital requirements, payment of wages and bills, purchase of new machinery, etc. The repayment tenor for a Short Term Business Loan is lesser as compared to a Long Term Business Loan. Though, the tenor and rate will vary across lenders; starting from 12 months and going up to 36 months.

For the convenience of customers, lenders offer Business Loans in various forms such as Overdraft, CC Facility, Term Loan, Dropline OD, etc. For instance, Axis Bank Business Loan interest rates are available on a floating basis and start from 11.40% (for OD and CC Facility) and go up to 17.65% (Quick OD).

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Benefits of Short Term Business Loans

While there are several funding options available to you in the present market, availing a short term business loan offers you benefits, such as:

High-Value Loans

You can avail of high-value loans to finance your various business requirements. For instance, you can avail of Tata Capital Business Loan of up to Rs. 50 Lakh without pledging collateral.

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Quick Processing and Disbursal

Financial institutions follow a minimal documentation based process and are therefore able to process and disburse the loans in a quick time.

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Flexibility

You can use the Short Term Business Loan amount for any business-related requirement without any need to inform the lender regarding the usage of the money.

No Dilution in Ownership

You need not pledge your stake in the business to obtain credit. There is no dilution in your ownership when you avail a Short Term Business Loan.

Multiple Options

You can avail the loan amount in multiple forms as per your requirements such as term loan, CC limit, overdraft, etc.

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How to apply for a Short Term Business Loan?

If you are facing financial problems in your business and need financing, you must follow the below-mentioned steps to apply for a Short Term Business Loan:

Check Your Credit Score: First, check your individual CIBIL score as well as that of your business before proceeding ahead. Most lenders require the main applicant to have a credit score of 700+; otherwise, they will not even consider the Business Loan application. If your CIBIL score is below 700, you must first work upon improving it and only then apply for the bank loan.

Compare different Lenders: You need to compare different offerings available in the market. There are several online platforms where you can compare Business Loans from different financial institutions without making a mark on your credit report. Check the eligibility criteria specified by the respective lenders and apply with those lenders whose eligibility criteria you are able to satisfy.

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Prepare a Loan Proposal: In order to apply for a Business Loan, you need to submit a detailed loan proposal along with the application form. This loan proposal should have all the details regarding the financial performance of your business in the past and how this loan amount can improve your profitability. If required, seek help from a professional.

Compile all Documents: You need to submit several documents along with your Business Loan application. Income tax returns, GST returns, bank statements, KYC documents, business registration documents, etc. It is advisable to prepare several sets of these documents in advance to avoid any hassles later on.

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Submit the Application: After you have completed the application form and prepared the supporting documents, you must submit the application with the lender. Several financial institutions offer document pick-up facility as well, so you can make use of it as well.

Follow up Regularly: Make it a point to follow up with the lender regarding the status of your application. If there are any discrepancies or additional documentation required, complete it immediately; otherwise, the processing might get delayed.

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Disbursal of Loan: After the financial institution has completed its process and ascertained your eligibility, they will issue you an approval letter, which will consist of all details pertaining to the loan. If you agree with the terms and conditions mentioned therein, sign the loan agreement and submit, following which the lender will disburse the loan to your account.