Your business is doing well and starting to grow. Congratulations! Now you’re entering the most crucial stage of your business life cycle, where you need to manage the growth appropriately to sustain the growth and sale. That’s where CreditEnable comes in.
An important factor in every business growth journey is funding – how much money you have and how much more you will need as your business starts gaining more clients and growing. As credit specialists who help SMEs access affordable loans, we see some of our customers struggle to realise their business growth because of mismanagement or lack of funding. So, let’s discuss how you can get your business the right finance it needs to grow.
Step 1: Consider all the factors involved in your business growth plan
Now that you’re expanding, revisit your business plans. Review what your initial plans to grow the business were when you first started and whether they’re still aligned with what you want now. Consider the following:
- Where you want to grow geographically.
- Do you want to do it online or in person (e-commerce or physical storefronts)?
- Do you need to expand the services you offer?
- How many more employees do you need to hire to fulfil demand at a larger scale.
- How much funding do you have access to, how much you will need, and what is the gap?
Step 2: Where will you get the money from to fund your business expansion plans?
You have a few options to consider:
- Borrow from family and friends
- Dip into your hard-earned savings
- Borrow from an informal lender
- Borrower from a formal lender
We recommend applying for a business loan with a formal lender for the following reasons:
- They will offer you fair loan terms at a reasonable interest rate.
- If you own assets that you can put up as collateral, you can get a high loan amount for a longer loan tenure and lower interest rate.
- Since formal lenders are governed by the RBI, the loans they provide are governed by strict regulation that is rigorously followed.
- As their operations are regulated by the RBI, a formal lender must disclose all their terms and conditions up front and will not try to take advantage of you.
- In case you are unable to repay your EMI, or you face any unforeseen circumstances which negatively impact your business, you can work with your lender to come up with a reasonable solution for loan repayment that works for you and them.
Step 3: Consider your business loan options and which one meets your growth plan
There are many different types of loans that lenders offer. Depending on your credit history and the type of assets you own, you can negotiate better loan terms for yourself. At CreditEnable, we partner with over 25 leading lenders in India to enable the following loan types for our SME customers:
1. Unsecured Business Loans
This type of business loan is your best option when you don’t own any assets to offer the lender as collateral, you want to grow your credit history, or your business is in a growth phase, so you need cash fast. Since these loans do not require collateral, lenders do not need to spend time verifying the condition and ownership of the collateral provided. Therefore, unsecured business loans are easier and faster to get. However, you do need to consider the following terms:
- You will not be able to get a large loan amount with an unsecured business loan
- Loan tenures are usually short, varying from 12 – 36 months.
- The ROI for an unsecured business loan is higher compared to other types of business loans.
2. Secured Business Loans
A secured business loan is any loan in exchange for which you provide the lender with some collateral. The collateral gives them some security, as it reduces the risk for them when lending to you. So, you can get a large loan amount for a longer loan tenure and a lower interest rate when you get a secured business loan.
3. Loan Against Property
This is a type of secured loan you get when you offer residential or commercial property papers as collateral to the lender. The amount of loan sanctioned will depend on the current market value of the property. Usually, you can get up to 70% of the market value. A loan against property is a good option when you’re looking to expand to another location or want to buy new property or expensive machinery.
4. Machinery Loans
You should get a machinery loan if:
- You’re in the market to buy better machinery to improve the quality of the product you manufacture
- You need to pay for repairs on the equipment you already own
- You want to invest in the newest technology for your business
Technology is changing more often now. Using the newest and most innovative machinery to manufacture your products will not only give you an edge over your competition but also allow you to manufacture more better-quality products faster.
And the best part: the machinery you purchase using the machinery loan can be used as collateral for the machinery loan itself. So, once you’ve repaid the loan EMIs in full, you own the machine and see may also see an increase in your business profitability.
5. Working Capital Loans
If you experience a temporary cash-flow crunch and need a small injection of cash to help cover your monthly overheads like paying salaries, rent, or your EMI, a working capital loan is a good option for you. This type of loan will help you continue operations without any interruption, and they’re short term, so once your cash inflow picks up again, you can pay back the lender in no time.
CreditEnable partners with 25+ lender partners to help our SME customers access affordable loans digitally. We have been able to get our customers unsecured business loans in as little as two days and secured loans within only a week of submitting their complete application package to a lender partner.
We offer loans at interest rates starting from 14%, depending on the type of business loan you need, the financial health of your business, and your credit score.
When you apply for a business loan with us, we check your loan eligibility by doing a soft pull of your Experian report. This helps us assess whether you meet our lender partner criteria. If you don’t qualify right now, we’ll tell you right away and also suggest ways of improving your chances of getting approved for a business loan in the future.
There are many different types of business loans that you can get from a lender. You need to consider the following factors before you decide which type of loan to apply for:
- What do you need that funding for/What is your growth objective?
- Do you own any assets to use as collateral?
- How financially responsible have you been in the past?
- What is your credit score?
Business Loans. Enabled Simply.