5 Common Challenges in Securing a Business Loan in India

Securing a business loan is essential for the growth and sustainability of businesses in the competitive Indian commerce landscape. However, various obstacles can make the loan application process challenging for business owners. Here, we discuss five common challenges that businesses face when seeking loans in India, along with strategies to overcome them effectively.

1. Lack of collateral

Many new or small businesses struggle because they lack sufficient assets to use as collateral. Collateral typically includes valuable items such as buildings, land, or expensive equipment that banks can hold as security for the loan. Without these assets, lenders may view the loan as high-risk, potentially leading to rejection of the application or imposition of high-interest rates.

2. Lengthy procedures

Applying and successfully obtaining business loan can include a lot of unnecessary steps and take long to complete. This elaborate procedure is a time taking process, usually comprising of thorough examination of the company’s creditworthiness, such as its financial statements along with its business plans and credit assessment which may take several weeks and even months to complete. During this period, the business operations might experience negative implications as the CEO and other owners spend more time navigating the loan process than on one’s business itself.

3. Unaffordable interest rates

The interest rates offered by lenders can be high, particularly for small to medium-sized enterprises as they seem risky to financial institutions. These rates determine the monthly repayment amounts, and if they are too high, it can strain the business’s finances. High interest rates could cause an extra burden in paying back the loan amount and in some cases might push a business beyond the point of no return.

4. Low credit score

Many small ventures in India have little credit limits as a result of their lack of knowledge in dealing with credits, the inconsistent activities on their records or they have had poor track records in handling loans in the past. The credit score is therefore a vital tool that banks rely on heavily when they are assessing the viability of giving credit or a loan. A low score can make it very difficult to secure a loan, as it suggests to lenders that the business may fail to meet repayment schedules.

5. Insufficient funds available

Businesses may find that even if they qualify for a loan, the amount approved by the lender may not be enough to meet their actual needs. This could occur if the lender is very cautious about risks or doesn’t fully comprehend the business’s operational requirements. When a business doesn’t receive the necessary funds, it may struggle to execute its plans effectively, resulting in slower growth.

How TallyCapital can assist

Recognizing these challenges, TallyCapital has developed a customized solution for our current Tally customers, facilitated through strategic partnerships with FlexiLoans and Kotak Mahindra Bank.

Key advantages of TallyCapital:

Quick procedure: By taking advantage of the already established connection with Tally, the loan application procedure is considerably speeded up due to the decrease in wait time.

No collateral required: We acknowledge the obstacles faced by young and new companies in raising capital, therefore the loans through our lending partners are collateral-free.

Competitive interest rates: Through negotiations with our lending partners, we make sure that our interests remain one of the lowest in the market, thereby providing a more convenient and affordable financing structure to our customers.

Access to the funds you need: TallyCapital understands the significance of receiving the right footing required by your business. Through our lending partners, we provide lending from ₹50,000 to ₹75 lakhs to businesses of all sizes which allows them to get funds necessary for growth and success.

Conclusion

It goes without saying that getting a business loan in India is not that easy, but TallyCapital enables you to sail through this process successfully. With our streamlined lending process and strategic partnerships, this puts you in a position where you can easily access the financial support you need, while keeping you on what you do best – growing your business.