Get a Commercial Loan for Small Business – Quick Application

Let’s start with the basics.

So, What Exactly is a Commercial Loan?

To start or even run a business smoothly, capital expenditure is required. An entrepreneur may not always have the capital ready due to shortage of capital or maybe capital is tied up in a different project. In such scenarios, the external funding in the form of debt. In layman terms, a loan provided to a business by a financial institution such as a bank or a lending company is known as a commercial loan. It is used to cover capital expenses or operational costs, which the company otherwise wouldn’t be able to afford.

Financing comes in different shapes and forms, fundraising or financing can be done in the form of capital infusion by offering equity in the business, lease financing, or even raising debt. Securing capital in the form of equity offering and bond financing is difficult. Due to high upfront costs and some regulatory hurdles, small businesses are often prevented from having direct access to equity and bond markets for financing. This often leaves smaller businesses to rely on lending products like various types of loans for businesses such as unsecured loans, a line of credit, or term loans.

Why the need for Commercial Loans?

• Expansion

Small businesses who have already built a strong footing in the market can now move on to the next stage, which is an expansion of the business. With an established business model and good transactional history in place, one can utilise a commercial loan to expand the business. Small business owners can also look at the possibility of expanding across geographical locations or a new target audience. Expansion not only helps with higher revenue opportunities but also opens up new opportunities like understanding a new customer demography which may ultimately lead to product development, goodwill, etc.

• Equipment and tools

For service-heavy businesses the differentiator is usually the service quality, but for businesses which have a primary offering of a physical product, it is the USP of their product which sets them apart from the competition. To have that competitive edge, it is essential for businesses to keep on refining and enhancing their products, this can be done solely by leveraging experience and investing heavily in research and development. The quality, overall output and productivity of a business can be enhanced greatly with the newer technologies and tools. Small business owners can take advantage of debt to invest in new technology that would give them a competitive advantage.

Read More: Machinery Loan for Business

• Inventory management

Sometimes, small business owners hesitate to take up big orders. Big orders mean having enough raw materials which are available in a ready-to-use state. The issue with running business on a lean inventory is that the entrepreneur may not have enough wiggle room during occasions of high demand. The upside with lean inventory is very limited i.e. low probability of dead stock, but for businesses with tried-and-tested products, lean inventory method is clearly counterproductive. Commercial and business loans can come in handy here. Small business owners can avail of commercial loans to buy the necessary inventory much ahead of time to brace themselves for a busy season ahead..

• Increase working capital

The cornerstone of any successful business be it micro, small, medium or large is to have healthy working capital. A business with high outstanding receivables in the market may have a hard time managing working capital efficiently. It is critical for a business to have healthy working capital to survive. Unforeseen payment delays by customers can be avoided if a commercial loan is availed to balance out the adverse financial implications.

• Consolidate Debts

For businesses with multiple lines of credit, it sometimes becomes really tricky to keep a track on all the debt payables, and in some cases, the cost of debt is more expensive. Small business owners maneuver out of this position by consolidating  can consolidate all their smaller debts into one single EMI. This not just makes it convenient to understand the total cost of debt (which is usually cheaper if the debt is taken from a single lender) but also reduces the strain on your monthly budget but also helps in keeping track of your debts. There is also an option to expand your repayment schedule for up to 12 months, which means that the chances of you reducing your monthly EMI amount are high. Just make sure that you compare the loan interest rates and make an assessment of the cheaper source of debt for your business.

How do I know if I am Eligible for a Cbusiness Loans?

If you can fulfil all the below requirements, you are all prepared to apply for a commercial loan.

• The business must be in operations for more than six months, this helps the lender make a fair assessment of how efficiently your business is running and if the lent amount can help improve your business.
• The minimum turnover of Rs. 90,000 or more should be fulfilled three months before submitting your loan application. This will help the lender assess the fact that you are not running a farce business and there’s enough liquidity to carry on with the operations for the survival of your business.
• The business should not be in the list of negative location. Operating in a high risk location translates into higher risk for the lender, it is much more difficult for the borrower to secure funding as lenders don’t easily invest in risky geographies and opportunities.
• The only entities that are not eligible for such loans are trusts, NGOs and charitable institutions. As by regulation and organizational structure, these entities do not qualify as businesses i.e. the objective of these entities is not making profit. These loans by design are such products that expect to make profit from lending to a money making entity.

Contact us in case your business falls under the restricted category or location, to confirm if you are eligible.

What all documentation would you need to submit while applying for a commercial loan?

Here’s a list of documentation you would need to submit while applying for a commercial loan. We, at Lendingkart, believe in sticking to the bare essentials to process a commercial loan.