The start-up ecosystem in India was ranked third globally, in 2015 with 4200 start ups in total! With heavy support from government machinery this trend is likely to continue strongly in future. With expanding economy all businesses whether new or old are looking at varied types of financial instruments and business loans to fund and expand their operations.
For an existing business the finance may be required for expansion of existing operations or entering into a new vertical; whereas the biggest hurdle for most of the start-ups is finding investors in the first place! Banks and lending institutions are now readily lending business loans but numerous myths and pre-conceived notions thwart many entrepreneurs from availing this facility. Let us discuss the most common myths that surround business loans in India
Myth 1: It is never ending and frustrating process
Most entrepreneurs consider process of approval and later disbursement of loan to be a tedious process with innumerable hurdles. But that is not really the case. Most of the banks and money lending institutions these days have set practices and standard operating procedures in place to ensure that the process of approval is objective and seamless. There are also clear guidelines that ensure automatic disbursements after approval is obtained.
Myth 2: Business loan means tonnes of documentation
If anyone is lending money to you, it is but obvious that they would like to take a look at the proposal for which loan is sought. But this by no means results in a pile of documentation. A crisp project report/ proposal along with standard documents pertaining to identity, address proof, bank statements and other income proofs would need to be furnished for loan application. With rise of online lenders, this need for documentation has further gone down.
Myth 3: Start ups never really get business loans
It is not always necessary that a start up is able to find financiers and venture capitalists. Such entities do apply for business loan and get them too. Banks and lending institutions just need a sound idea that makes business sense to put their money in.
Myth 4: Interest is the biggest factor while choosing a loan
Interest is “just one” of the major factors that must be looked into while taking a business loan. Reading fine print of conditions related to foreclosure, repayments, mortgage and terms that can result in limiting business operations are equally important.
Myth 5: A perfect credit score is a must
A good credit rating and record helps in obtaining loan but a less than perfect score does not mar your chances of getting loan completely. If your business idea is workable and convinces the lending party of its viability, that alone should be able to get the loan approved for you.
These were the common myths that surround business loans. Business loans need work but they are not as hassled and difficult to avail as most of us think. Once approved they act as lifeline to your business and dreams!
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.