5 Common Challenges in Securing a Business Loan in India

So, you’ve got a vision! A game-changing product or service is ready to roll out, but there’s one little thing missing—funds to get started. Most successful businesses, from local stores to global giants, began by securing capital to fuel their growth.

Today, new small business loans and startup business loans offer budding entrepreneurs like you the financial push needed to kick things off. But if you’re a small business owner wondering how to navigate the loan application maze, here’s a straightforward guide to help you on your way.

Let’s walk through how to secure MSME loans for startups or new business loans in a simple, step-by-step journey.

Step 1: Know your loan options

Think of loans as different shoes—you wouldn’t wear hiking boots to a beach. As particular shoes suit specific occasions, each loan type serves a different business need. To pick the best fit, let’s break down the main types of loans available for small businesses.

• MSME & SME loans: If you’re running a micro, small, or medium enterprise, this type of loan is tailored for you. It’s designed to fund daily operations or growth projects for smaller businesses.
• Working capital loans: Ideal for day-to-day expenses, working capital loans keep things moving when cash flow is tight. It’s like a safety net for payroll, rent, or other overheads.
• Equipment loans: If machinery or technology is central to your business, an equipment loan can help cover necessary tools or upgrade costs.
• Invoice financing: If you’ve got cash tied up in invoices, this loan type lets you get a large portion of your receivables upfront while the lender waits for customer payments.
• Startup business loans: This is perfect if you’re in the early days of your entrepreneurial journey. These loans give you that initial cash boost to get your business running.

With your loan type in mind, you’re already one step closer to securing your first new business loan. Ready to keep going?

Step 2: Calculate your loan needs with an EMI calculator

Now, let’s talk about loan affordability. Imagine you’re eyeing a piece of equipment or planning an expansion—how much should you borrow? And can you handle the repayments? This is where a business loan EMI calculator becomes your best friend.

Most lenders offer this tool on their websites. Enter the loan amount, interest rate, and tenure, and you’ll see your estimated monthly EMI. Knowing these numbers upfront can help you borrow wisely and ensure you’re comfortable with the repayment schedule.

Pro Tip: Keep your monthly EMIs manageable so your company can grow without financial stress.

Step 3: Get your documents ready

Think of documentation as the ID for your loan application—it tells lenders who you are, what you’re about, and how you plan to succeed. Preparing documents in advance keeps the process smooth and hassle-free. Typically, you’ll need:

• Completed loan application form: This is your first impression, so fill it out accurately and double-check the details.
• Business plan: Be clear about your goals, current standing, and how you’ll use the loan funds. This isn’t just paperwork; it’s your chance to convince lenders you’re on a winning path.
• Financial statements: These give lenders a look into your business’s financial health, so include recent bank statements, tax returns, and balance sheets if available.
• KYC documents: Proof of identity, business registration, and other KYC (Know Your Customer) documents establish you as a reliable borrower.

Step 4: Build a strong business profile

If you’re wondering what happens behind the scenes after submitting a loan application, here’s the scoop: lenders will check everything from your credit score to your business’s track record. It’s all about gauging how likely you are to repay. Here’s what you can do to make sure your profile shines:

• Maintain a good credit score: A score above 700 can be your golden ticket to better loan offers. If it is lower, consider improving it by paying off smaller debts or handling existing credit responsibly.
• Create a detailed business plan: Show how the loan will impact your business. Lenders want to know their funds are going toward growth and success, not just covering losses. Use your business loan calculator to make realistic financial projections.
• Select the right loan type: Choose the loan that matches your purpose. If you’re clear about your goals, you’re less likely to run into bad debt or mismatched repayments.

These steps increase your chances of approval and help you secure a competitive business loan interest rate.

Step 5: Submit and await approval

Once you’ve found the right lender, completed your application, and gathered documents, it’s time to hit submit! Nowadays, many lenders offer a seamless online application process, meaning you can apply for new small business loans from the comfort of your office or home.

What to expect next:

• Verification: Lenders will verify your documents digitally or by reaching out.
• Approval and disbursement: Once everything checks out, your loan is approved, and the funds are coming!

If there are any hiccups, don’t hesitate to keep in touch with your lender—they’re often willing to answer questions and work with you on the finer details.

Conclusion

With this step-by-step guide, you’re now equipped to approach your first business loan application with confidence. Remember, securing the right loan is about the funds and building a partnership supporting your vision.

At TallyCapital, we understand that every business is unique. We don’t believe in cookie-cutter loan options. Instead, we focus on your specific needs, offering a range of customised business loans to fuel your growth. Whether you’re looking for a small boost to cover cash flow or a larger amount to drive expansion, we’re here to make the process simple, transparent, and stress-free.

Are you looking for small business loans to grow or expand your business? You will find a plethora of choices. While traditional banks have always been available to offer loans, you will find many more options today, such as finance companies, non-banking finance corporations, private lenders, and more.

One of the first questions that might pop into your mind is whom to approach for a business loan. Should you go to a traditional bank, or will a modern/advanced finance company suit your needs?

This blog will help you understand more about choosing the right option when seeking financial assistance for your business.

Before we get into the details, here is the answer to the main question—we cannot pinpoint one particular option and declare it the best loan provider. The choice will depend on your business’s requirements and other factors. We will see more of these in the following sections.

Bank vs finance company

Wondering which one offers the best business loans? Here are some factors you should consider before choosing the one that suits your requirements the best.

Size and age of business

If you have been in the business for a long time, and if the size of your business is quite big, you can choose a bank for financial assistance. Traditional financial institutions like banks look for the history, long-standing nature, creditworthiness and size of the businesses before approving their loan application. 

However, if you are a newbie and don’t have much credit history to show, you can approach a finance company for your loan. Yes, the interest rates may be higher than what banks would charge you, but you can be assured that your loan application will not be rejected by these companies. If you are looking for a small business loan, a finance company would be the better choice for you.

Documentation and collateral requirements

Banks require you to submit detailed documentation, business reports (like financial statements, tax return copies, etc.) and collaterals before approving your business loan. The process of loan disbursement is slightly longer here, because banks need to check all these documents, verify the authenticity and then proceed to approving the payment. So, if you have enough documentation and collateral, the banks require, you can approach them for your business loan requirements.

However, if you have a newly established small business, you may not have the necessary financial documentation and collateral that banks demand. In that case, you can opt for a finance company for financial assistance. This is because the loan formalities of these lending agencies are quite flexible, and most don’t require businesses to submit any collateral before approving loans.

Affordability

You will notice a stark difference in the interest rates charged by finance companies and banks when you apply for a business loan. The former often has higher interest rates than the latter because of their flexible processes, quicker process time, simpler documentation, non-requirement of collateral and other reasons. 

On the other hand, banks charge reasonable interest rates because they follow a more systematic and rigorous loan approval process. You can opt for a finance company if you can afford the high interest rates they charge. Small businesses may not be eligible for business loans from banks; hence, it is highly recommended to go for finance companies only if the interest rates fall within your budget.

Waiting time

Are you in urgent need of a business loan in India? Approaching a bank may not be the right option for you in that case! Even if you submit all the documentation on time, banks take a long time to check and verify it before sanctioning the required loan amount. Usually, you receive the funds in your account only after a few weeks from submitting all the documents and financial reports.

Finance companies, on the contrary, have quicker processing times because their loan approval process is very flexible. Once you have submitted the basic information required by these firms, you can expect the funds to be credited to your account within 24 to 48 hours. So, if you are hard-pressed for funds in your business, approaching a finance company would be the right option.

Conclusion

As you can see, banks and financial companies have their own merits and demerits when it comes to loan approvals. Hence, it is always better to assess your requirements first and then choose your lender wisely for the best possible results. For example, business loans for small business owners may be more practical when taken from a finance company than a bank.

If you are a small business looking for quick business loans, you can approach TallyCapital right away. If you are using TallyPrime as your business software, all you need to do is select the add-on feature, TallyCapital, for quick business loans. 

Once you check your eligibility and apply for your business loan here, TallyCapital connects you with the relevant financial partner to ensure you get the funds into your account as early as possible. 

Running a business can bring new challenges every day—unexpected expenses, seasonal fluctuations in sales, or just the usual hustle to keep everything running smoothly.

A working capital loan can be the perfect solution for businesses to meet short-term cash needs without tapping into funds reserved for long-term goals. Whether you’re facing a sudden office renovation, payroll expenses, or a slow season, this loan could be your secret weapon for keeping everything on track and thriving.

What exactly is a working capital loan?

Simply put, a working capital loan is a short-term loan designed to cover a business’s everyday expenses. Unlike a credit for purchasing a new property or large equipment, this loan is strictly for funding your company’s day-to-day needs. It’s a flexible solution that doesn’t limit you to specific expenses; instead, you can decide how best to put it to work in your business.

Financing options such as working capital term loans, revolving credit lines, and other business working capital loans help keep your business operations steady, even when cash flow is tight. These loans don’t require any long-term commitment and allow you to handle immediate needs or emergencies, making them particularly useful for small businesses and MSMEs.

Why might your business need a working capital loan?

Imagine having the perfect opportunity to buy discounted inventory or needing to hire additional seasonal staff. Without accessible cash, you might miss out on these advantages. This is where working capital loans enable the business to make moves without waiting for time to replenish cash. Below are some situations when a working capital loan can be useful:

• Seasonal sales cycles: Some businesses, like retail or tourism, perform well or poorly at certain times of the year. When sales go down, a working capital loan allows you to pay for overheads like rent, bills, and wages.
• Business growth: Growth inevitably requires additional costs. A working capital loan can help meet the operational costs of business expansion, allowing you to make profits over time instead of using reserves to expand and grow.
• Dealing with contingencies: Things like machinery breakdowns, key employee absences, or even the failure of a particular order to be completed may hinder sales revenues. A working capital loan helps a business have the necessary dependents for its activities to run smoothly without any hindrance.

Types of working capital loans: choosing the best fit for your business

1) Working capital line of credit

Think of this as a business credit card with a more flexible and larger credit limit. A line of credit is available whenever you need it and doesn’t require re-approval each time, so you’re free to access it as cash flow demands. This makes it an ideal fit for businesses facing unpredictable expenses.

2) Working capital term loan

Consider a working capital term loan for a structured, one-time cash infusion. You receive a lump sum upfront and then can pay it back over a fixed period. This is ideal for businesses with defined cash flow issues or one-time expenses. It offers predictability with a fixed interest rate, allowing you to plan your finances efficiently.

3) Invoice factoring

If you’re waiting for bills, invoice factoring lets you unlock immediate cash by selling those invoices to a lender. This approach provides cash flow support without taking on traditional debt, which can benefit businesses with larger receivable outstandings.

4) Merchant cash advance (MCA)

With an MCA, you receive a cash advance based on your future revenue. You can repay by giving a portion of your daily sales, so it’s well-suited for businesses with daily transactions. However, it’s essential to consider the costs and potential impacts on cash flow.

Pros and cons of working capital loans

Pros

• Flexibility: A working capital loan helps cover anything from payroll to seasonal stock.
• Quick access: Some lenders can provide same-day or next-day approval, giving you fast access to funds when needed.
• Less collateral required: Many working capital loans don’t require significant collateral, allowing smaller businesses without large assets to gain funds.
• Preserve ownership: Unlike equity financing, working capital loans allow you to maintain full ownership of your business.

Cons

• Higher interest rates: Short-term loans often have higher rates than traditional ones.
• Short repayment periods: Short terms mean you must be prepared to pay it back quickly, so consider your cash flow when choosing a loan.
• Risk of debt cycle: Frequent borrowing can lead to a debt cycle if improperly managed.

When to secure a working capital loan for your business?

If your business is cyclical, frequently encountering occasions where expenses outstrip revenue, a working capital loan might be just what you need. Startups, SMEs, and MSMEs also often benefit from these loans because they provide a financial lifeline for maintaining operations and growing. Here are some ideal times to consider applying:

• Managing operating expenses: When you have to cover essential expenses like payroll, rent, or utilities during slower months.
• Seizing growth opportunities: when hiring new staff or buying inventory when demand spikes.
• Handling unexpected repairs or delays: To keep the business steady during emergencies or waiting for payments.

How to apply for a working capital loan?

Applying for a working capital loan is straightforward. You can approach traditional banks, online lenders, or credit unions. Generally, online lenders provide faster approval and funds than banks, but they may come with higher interest rates.

Banks or credit unions are good choices for businesses with strong credit histories and competitive rates.

To apply, you’ll need basic financial documents, such as profit and loss statements, balance sheets, and proof of revenue. Once approved, you can typically access funds within a few days, depending on your lender.

Conclusion

At TallyCapital, we know that every business is unique. That’s why we don’t believe in one-size-fits-all solutions. Instead, we work with you to understand your specific needs and goals, crafting business working capital loans that suit your situation.

Our approach ensures you get a straightforward, effective loan option tailored to help you grow without unnecessary complexity. Contact TallyCapital today, and let us help you confidently reach your business goals!

Applying for a startup business loan in India as an entrepreneur can be challenging if you don’t have a fair idea about the credit types available and their terms. With countless options out there, comprehending the eligibility criteria, necessary documents, and application process can be critical in enhancing your chances of getting through. This is a complete guide to business loans for startups in India, covering basic tips for new entrepreneurs like you.

Eligibility for a business loan

You must satisfy certain essential business loan eligibility criteria to get fund approval. These are:

• The age of existing businesses should not be more than five years.
• Annual turnover/ revenue should not exceed INR 25 crores in a single financial year.
• Business loans are available only to Limited Liability Partnerships (LLPs) or Private Limited companies, not proprietorships or partnership accounts. 
• Eligible applicants should also obtain DIPP approval.
• Government startup loans need certain guarantees.

Documents required for business loan

While applying for a startup business loan, you will be required to submit the following documents: 

• Photographs: Two passport-size copies
• Identity proof: PAN card, passport, aadhaar card, voter’s ID, driving license 
• Address proof: passport, driving license, aadhaar card, postpaid phone bill, voter’s ID
• Bank statement: Last six months 
• Income proof: Income tax returns, salary slips, PAN card 
• Proof of bank account:  Cancelled/scanned cheque, passbook’s front-page copy 

Factors determining the approval of business loans

Whereas sanctioning business loans remains exclusively at the discretion of the financial institutions, several factors go a long way in affecting your odds of availing of the credit. The following are five of the most important factors you need to know:

Nature of the business: The kind of business you seek a loan for may be the most important factor determining the business loan approval. This is because the magnitude of risk varies for each type of company or industry they are in. A bank may become unwilling to lend money to certain high-risk businesses. 

Profitability: Your net profit can directly affect how much credit you get. Financial institutions have a minimum turnover eligibility for sanctioning loans. The higher your profitability, the better your chance to get that elusive business loan.

Credit history: Banks and other financial institutions provide loans only when they are pretty much assured that the entrepreneur can repay the amount. This surety is mostly assessed through the CIBIL score of the applicant. Having a high CIBIL score can help you get a business loan.

Business plan: Often, the companies that lose out on a loan sanction are those that fail to draft a well-formatted business plan. Properly writing a business plan, coupled with intentions on how the loan could be used, helps move the decisions in favour of the applicant.

Documents: Like all types of loans, the success of getting business loans depends on the documents the businessperson submits to the lending institution. Have all the necessary paperwork ready before going to the lender to secure a loan for your business.

Recommendations for new entrepreneurs

It seldom happens that a budding entrepreneur successfully gets a business loan sanctioned. A few suggestions that can increase your chances of getting credit approval are: 

Prepare a good business plan: A thorough business plan will help you get a business loan. This should be a document that shows your business goals and financial projections and describes how you plan to use the money from the loan.

Maintain a good credit score: Maintaining a good credit score can help you obtain a business loan. So, don’t let a payment of a bill or an installment get delayed. 

Prepare a complete loan application: Ensure that your loan application is very comprehensive and carries all essential documents. 

Learn about the government loan schemes: The Indian government offers various loan schemes for MSMEs and startups. MSME loans for startups are also available. Learn about them and apply accordingly.

Use professional services: If you are a novice in the world of business, get professional help. Reach out to a financial advisor or a business consultant and increase the chances of getting your business loan approved.

Conclusion

Acquiring funding through business loans during the initial phase of a business can sometimes be very challenging. However, once you know how to become eligible for a business loan, what documents will be needed, and what other government schemes exist, you are well on your way to getting that fund. With the right approach and a little patience, you can secure funds for your venture.

At TallyCapital, we believe that every business is unique, with different challenges and potential. Thus, we provide customised business loans that fit your needs. We won’t stuff you with complicated loan structures; instead, we help you realise your business goals by listening to what you need and carefully formulating solutions that will best suit your needs.

Related Blogs: 6 Different Uses of Business Loans: How to Get Started

Are you planning to start a new business and be your own boss? If yes, you must do detailed financial planning to run your business without disruptions or hassles. A strong financial base is essential for any business to succeed. At least one-third of Indian startups fail within a year, often due to a lack of sufficient funding.  

To ensure your business has a continuous supply of funds for day-to-day activities, you can opt for startup business loans. With the advent of technology, access to these loans is now easier than ever. According to a recent survey, at least 70% of businesses with less than two years of experience use new business loans to grow and expand. 

If you are still wondering how a startup business loan can help you, this blog is for you. It will walk you through the multiple benefits you can enjoy by applying for these startup loans.

Advantages of startup business loans

A startup business loan can help entrepreneurs turn an innovative idea into reality. It can provide the following benefits to the borrower:

Easier to access

If you are a small business owner, you might not have sufficient credit history or credibility to qualify for traditional bank loans.  Even if you do, procuring traditional business loans is a tedious process and takes time. 

This is where new small business loans can help you to a great extent. Startup business loans are accessible with much less effort compared to business loans from large banks. These loans require minimal documentation and can be processed quickly. In most cases, these loans are disbursed to your account within 24 to 48 hours from the time of application. 

If you need urgent financial assistance for buying new machinery, adding inventory, etc., you can apply for these loans and continue with your operations as usual.

Increased liquidity

You can carry out your regular operations without any disturbances only when you maintain sufficient liquidity. The funds used for routine operations like electricity, salaries, rent, etc., must always be adequate. Most businesses, especially smaller ones, shut down within a year or two due to dangerously low working capital and liquidity levels.

If this situation resonates with you, consider taking an MSME loan for a startup. These loans for micro, small and medium enterprises are of great help to small businesses. These loans are available for short-term, medium-term and long-term. These loans help small business owners easily meet urgent working capital needs, ensuring smooth operations. 

Flexibility of options

One of the key advantages of startup business loans is the flexibility they offer in terms of loan amount, repayment tenure and type of loan. If you have a good credit history or a high credit score, you can even negotiate for a lower interest rate with your lenders.

Depending on your requirements, you can choose from a variety of startup loans. If you need financial assistance to buy new or advanced machinery, you can opt for exclusive equipment financing loans. You can even sell out your outstanding invoices to a third party by using invoice factoring services. If you are looking for loans to fund regular operations, opt for working capital loans and so on. 

These loans have made financial assistance easily accessible, quicker and hassle-free than before. 

Conclusion

Startup business loans can immensely help if you want to set up your small business and continue operations smoothly. With these loans, you can update your inventory and invest in advanced machinery to increase productivity and gain an edge over your competitors.

If you are looking for affordable, quick and effective startup business loans, consider TallyCapital for all your needs. Check your eligibility and apply for a loan. TallyCapital has tie-ups with some reputed lenders in the market, such as, Kotak Mahindra Bank, FlexiLoans and L&T Finance. Once your loan application is approved, you will receive the funds in no time.

Read more: 8 Types of Different Business Loans – How to Find Your Ideal fit

Many Indian entrepreneurs or small business owners face a painstaking dilemma while seeking business funding. They often get confused about whether to opt for a secured or unsecured business loan. Both types of financing have benefits and drawbacks, and the choice between them depends upon various factors, including the financial health of the business, growth plans, and the businessperson’s credit score.

What are secured business loans?

Secured business loans require collateral, such as real estate, equipment, and other valuable assets, to obtain the credit amount. Since there is security, the lender offers low interest rates and easier terms. Secured business loans are especially good for businesses with valuable assets looking for bigger credit amounts or better interest rates.

Types of secured business loans in India

There are several secured business loans available in India, and a few of them are mentioned below: 

• Term loans: These are loans advanced in a single lump sum and to be repaid with interest over a fixed period. Business assets are used as collateral.
• Equipment finance: Equipment finance can essentially be regarded as one of the loan options used by businesses for purchasing new equipment or for upgrading current ones. The loan is granted against the support of the equipment itself as collateral.
• Business loan against property: In this credit type, businesses can obtain sizable financing using their business or residential property as security. The advantage here is the longer tenure and lower interest rate.
• Gold loan: Here, the gold of the applicant is used as collateral in exchange for speedy finance. The borrower can obtain quick sanctioning, easy repayment, and relatively lower interest rates.
• Project loans: In this category, big projects involving infrastructure development or real estate construction are funded with sanctioned money. The sum allotted to the loan applicant is often disbursed in phases corresponding to the different stages of the work, such as planning and execution.
  

What are unsecured business loans?

Unsecured business loans for MSMEs do not demand any security but are based on the borrower’s creditworthiness and financial history. Most of these credit types carry higher interest rates and tougher eligibility criteria. Yet, they allow easy access to finances and are well suited for businesses without many assets.

Types of unsecured business loans in India

There are many types of unsecured business loans available in India, such as:

• Working capital loan: This is a short-term loan made available to businesses to manage their day-to-day operations smoothly. It can be used for various expenses, including the purchase of inventories, payment of salaries, and other costs.
• Cash credit: It is another type of working capital loan from which businesses can withdraw funds up to a certain limit. Interest is charged only on the amount utilised.
• Overdraft facility: Businesses can withdraw amounts over and above the available funds in their account up to a limit to meet immediate short-term demands.
• Letter of credit: This is a financial contract issued by the bank of an importer or buyer to the seller, guaranteeing that money will be received from the buyer on the due date and time. It plays an important role in reducing the risks of international transactions.
• Factoring refers to a business selling its accounts receivable, or invoices, at a discount to acquire immediate cash. The process reduces the time taken in collections and helps improve a business’s cash flow.
• Startup loans: These loans are specifically designed for newly established companies. They often come with flexible terms, which can benefit early-stage growth. The primary challenges when applying for this type of loan are the dearth of collaterals and restricted operating history.

Advantages and disadvantages of unsecured business loans

Although unsecured loans in India offer several benefits, they also come with some drawbacks. Let’s check the pros and cons.

Advantages:

• No assets are required as collateral
• May offer quick funding
• Available to different kinds of borrowers

Disadvantages:

• Interest rates could be much steeper
• Requirements may be more stringent
• It may require a personal guarantee
  

Is an unsecured business loan better than a secured business loan?

The choice between an unsecured and a secured business loan would depend on the business’s financial condition, creditworthiness, and growth plans. The former would be perfect for firms with very few or zero assets, whereas the latter is the answer when huge funding is required or better interest rates are desired.

Business loans have become common in the Indian market today. Owing to the quick availability of the best online unsecured loans, enterprises do not encounter much hassle in gaining capital. However, most lenders demand higher interest rates and lay down strict rules for accessing funds. 

Secured business loans normally have lower interest rates and better terms for the business but always require collateral, which is usually a big problem for many businesses. This may become a hurdle, especially when businesses have no valuable assets.

Entrepreneurs and small business proprietors must weigh their options and consider interest rates, repayment terms, and the requirement for collateral when making the best choice.

Conclusion

In short, secured and unsecured business loans both have pros and cons, and what suits a business best depends on the case. Entrepreneurs and small business owners should make decisions appropriate to their businesses after carefully considering the interest rates, repayment terms, and collateral requirements of both loan types.

At TallyCapital, we believe that every business is unique, with different challenges and potential. Thus, we provide customised unsecured business loans that fit your needs. We won’t stuff you with complicated loan structures; instead, we help you realise your business goals by listening to what you need and carefully formulating solutions that will best suit your needs.

Read more: 5 Advantages of Taking Unsecured Loans

This season of festivity is a good time for businesses to increase their sales and revenue. However, it will be necessary to have enough stock. From this perspective, the role of inventory management in meeting customer requirements without delays is critical. 

Whether you are a small retailer or an enormous enterprise, the potential to stock up ahead of time would be what makes or breaks your success in the festive season. You can prepare yourself better by boosting your inventory through business funding loans.

Here, we will see why inventory is important and how you can get a business loan to meet your inventory-related requirements.

The importance of inventory

Inventory is the backbone of any retail or product-based business. If you run out of stock, there is a high possibility that you will disappoint your customers, and also fail to maximise the sale. In the worst-case scenario, it can earn you a bad reputation. 

Poor inventory handling leads to stockouts, overstocking, or loss due to unsold products. Therefore, businesses must maintain the perfect stock balance. The festive season, especially, is a golden chance for you to improve your profits by increasing your sales.

Why stocking up is important during the festive season

Listed below are significant reasons establishing why you should stock up in advance.

Peak demand

Since consumers spend during festivals, the demand is high during the festival season. This also happens to be a good time for celebrating, and people will seek gifts, lights, and other novelties for the festive season. 

In case your firm is not well prepared for such increased demand, you may face problems in delivering orders on time and, worse, lose customers to other firms that are adequately prepared.

Higher profit margins

Festive sales usually have more than the average profit margin because most customers tend to open their purses and wallets without batting an eyelash. Stocking high-demand goods, therefore, gives the perfect opportunity to capitalise on the customer’s desire to spend; this, in turn, results in ample mileage in terms of profits. You can consider business financing to stock up during these times.

Promotional campaigns

The majority of businesses go all out during the festive season and attract customers with promotional offers and discounts. Without your optimum level of inventory, such campaigns may turn out to be nightmarish for you since you will not be able to fulfil the orders. Thus, you must prepare well in advance by keeping enough stock on hand to deliver all the promises you made through your promotional campaigns. 

Build brand loyalty

With adequate planning, a business ensures that customer needs are met during the festival seasons. Consequently, trust and loyalty evolve from a hassle-free buying experience, especially when everything they need is available. Consistent customer service encourages a cycle of repeated purchasing behaviour and fosters long-term loyalty.

How business loans help in inventory management

For most businesses, cash flow is always the biggest challenge in the festive season. The need to stock up a good amount of inventory means a significant upfront investment on the part of the business. Here is where business loans come to your rescue. Even if the size of your business is small, you will find many financing options to help with your inventory requirements.

Here is how a business loan can help boost your inventory during the festive season —

Access to required capital

Business working capital loans and other financing options immediately supply you with liquidity to buy inventory. Instead of living off existing cash reserves, you can fund purchases from the loan to get yourself stocked in full without depleting your cash flow. This is particularly helpful for small businesses since they don’t have the liquidity to make large purchases at once.

Bulk purchases with lesser costs

Getting a loan will enable businesses to purchase stock in bulk. Most suppliers give discounts for bulk purchases. You can lower the cost per unit of your business when selling these items during the festive season, thereby raising your profit margins.

Opportunity for product diversification

With more capital, a business has the potential for stock diversification. With business capital loans, you can upgrade your inventory with many new and trending items. The more diverse your product range, the higher your chance of increasing sales.

Conclusion

The festive season is always exciting as well as challenging for businesses. There are many opportunities to increase sales and revenue, but you would need an adequate amount of stock. This helps you to cater to customer demand and avoid any possibilities of stockouts, thereby maximising your profit margins. 

Business loans can help you to a great extent in this case. Apply for a business loan with TallyCapital by following simple steps.TallyCapital is a platform where you can quickly check your business loan eligibility and apply for financing. Use this to get quick cash and boost your inventory to make the most of the festive season. 

Every business owner needs capital to grow, expand, and innovate. However, whenever you go to a bank or financial institution, they first ask for collateral security, which can be a significant hindrance for many entrepreneurs. Fortunately, today, you can get a business loan without collateral easily and with just a few clicks.

Here are some easiest ways to get an MSME loan without any collateral security. You just need to check the right boxes, and you can easily get a collateral-free business loan.

What do you understand by a collateral-free business loan?

Most traditional lenders, like banks, ask for collateral, such as inventory, property, gold, or equipment, to minimise risk. However, most start-ups or small business owners do not have the liberty of easily providing collateral since they have limited assets.

Due to this challenge, they are compelled to depend on their savings, credit cards, or high-interest personal loans, which can hamper progress and escalate their financial risk. New business loans without security provide an easy solution, allowing business owners to access funds without putting their possessions at risk.

A collateral-free or unsecured commercial loan does not entail applicants keeping their assets, such as inventory, equipment, property, or other securities, to obtain funding. These loans are provided based on the character, capacity, cash flow, conditions, creditworthiness, and commercial performance of the applicant.

Eligibility requirements for a business loan without collateral

Firstly, you need to evaluate your eligibility for getting a collateral-free loan. The eligibility requirements vary according to lenders; however, some general requirements are the same, such as —

Credit score:

Your credit score replicates your credit history and your credit habits. The most popular credit rating agencies are CIBIL, Experian, and Crif High Mark. Most lenders require a good credit score. An ideal credit score is above 750. If your credit score is below 750, it does not mean that you will not be able to secure a loan; however, since it is riskier, the terms and conditions will vary, and you might be charged a higher rate of interest on the same loan.

Business age:

Most traditional lenders look for a minimum business age of one to two years. Having an operational business for 3 years is ideal before most lenders would be willing to sanction an unsecured business loan. However, many schemes and options are available for business owners and start-ups who have just begun their operations and need capital to expand their entrepreneurial ventures.

Revenue and annual turnover:

The revenue you generate during the whole financial year is your annual turnover. It plays a deciding factor in the quantum of loans sanctioned by banks and other financial institutions. It is crucial to have a consistent and steadily increasing turnover as well as profitability. The higher the revenue, the higher the quantum of loans, and vice versa.

You must confirm your business has a steady cash flow from operations to meet the repayment plan. Unsecured loans usually have higher interest rates compared to secured loans, starting from 10% and going up as high as 24% per annum.

KYC documents:

You need to have your credentials and documents ready for securing a business loan. You need to have the following documents to get your loan sanctioned —

• Personal Identification Documents, such as PAN Card, Aadhaar Card
• Address Proof, such as an Aadhaar Card or Electricity Bill
• Business Proof, such as UDYAM Aadhaar Registration
• Business Registration Documents such as GST Registration
• All the Licenses Required for Your Business
• Income Tax Returns
• Project Reports
• Bank Statements ( 6-12 months)
• Financial Statements (Profit & Loss, Balance Sheet)

All the lenders are under the purview of RBI to strictly follow the “Know Your Customer (KYC)” Norms that include establishing the identity of the individual as well as the business.

Choose the right lender for your MSME business collateral-free loan:

You can choose to apply for a loan from Banks, Non-Banking Financial Companies (NBFCs) and  Fintech Lenders that provide speedy access to funds without collateral.

Conclusion

Getting a business loan without collateral is a prudent choice for entrepreneurs who lack substantial assets but have robust business potential. Remember to always evaluate loan terms sensibly before making a decision. 

At TallyCapital, we identify that every business is unique, with its own set of challenges and opportunities. Thus, we are committed to providing you with modified business loans that cater to your specific needs. Our objective is to help you achieve your business goals, not to burden you with complicated loan structures.

Businesses need a constant flow of finances to keep their businesses up and running. In most cases, they seek the help of banks, financial institutions, individual money lenders and fintech companies (new players in the market) for short-term and long-term loans.

If you approach one of these lenders for finances, you should have a good credit history to be eligible for the loan amount you are looking for. Your credit history will determine if you can repay the loans. Lenders prefer borrowers with a good credit score, as this helps them stay away from defaulters.

If you are looking for funds to grow/expand your business, you should first work on improving your credit history. This will ease your access to loans at attractive rates. Here are some of the top 6 ways you can try to improve your creditworthiness.

1. Timely Payments

This might seem like a simple tip; however, this is one of the best ways to improve your business credit history. Set up reminders, maintain a direct debit system, or keep a record so that you don’t miss any payments.

When you default on your payments, it can impact your credit history to a great extent. These payments could be credit card payments, monthly loan repayments, or any other payment. When you fail to pay within the due date, banks may charge penalties or late fees. Thus, you may end up paying more than the actual due, creating a lot of debt for you in the bargain.

2. Avoid closure of old credit cards or accounts

Don’t close your old credit card or account, even if you have paid off the debt fully. The older your credit card/account, the more reliable you are. When lenders check your credit history at the time of sanctioning a loan, they will review your existing credit cards and account status.

When you cancel your credit card/ bank account, you will get rid of your credit history as well. Hence, these cannot be taken into account when calculating your credit score. If you want to manage your multiple cards/accounts efficiently, you can consider closing a recent card/account than an older one. Your old cards/accounts denote your stability and your potential to make payments on time.

3. Keep a close watch on your credit – business and personal

You should always keep your business and personal accounts separate for better financial management. This way, you can manage your credit efficiently. In most cases, lenders look into the personal financial details of borrowers when sanctioning a business loan. 

When you maintain both personal and official credits separately, you can track your financial habits and their impact on your credit balance. Paying business expenses from a designated account, using a professional business ID for paying taxes, etc. are some good habits you can follow to maintain a good business and personal credit score.

4. Keep your credit balances low

Your credit utilisation capacity has a big role in impacting your credit score. Ideally, your credit utilisation capacity should not exceed 30%. For example, if your business is eligible for an overdraft facility of Rs.10 lakhs, you should not withdraw more than 30% of the same, which is Rs.3 lakhs.

Even when your credit utilisation is within the 30% range, you should ensure you make the repayments on time, and try your best to close off the loan as quickly as possible. When your credit utilisation is more than 30%, it can adversely impact your credit history and creditworthiness. So, it is a good idea to keep your credit balances (both professional and personal) as low as possible.

5. Follow up with vendors to report payments

The strength of your business depends on the quality of your vendors/suppliers. Though these vendors don’t need to furnish a credit history mandatorily, you can request them to furnish one regularly. When lenders do a background check on you, they can go through these credit history reports and understand the high quality of the vendors you deal with daily. 

This gives your business a huge boost. Eventually, it helps to improve your credit history as well. You can request your vendors to furnish a proper credit history report from time to time to show you have made all the necessary payments on time.

6. Check your credit score regularly to watch out for errors, if any, and fix them

It is a good idea to check your business credit history at regular intervals. This way, you can review your financial data there to spot discrepancies, if any. If any of your payments have been missed out, wrongly recorded as late payment, or entry of incorrect mobile number and other details, you can fix them immediately and get your credit score sorted.

Bottom Line

In conclusion, maintaining a strong business credit score is crucial for securing better financing options and ensuring long-term growth. TallyCapital not only provides flexible business loans tailored to your needs but also empowers you to keep a close watch on your financial health. With the option to access your credit score report for free 11 times a year, you can stay informed and take proactive steps toward improving your creditworthiness. Take charge of your financial future with TallyCapital and unlock new possibilities for your business!

Irrespective of the size of your business, you will require a business loan to carry out different activities. A business loan will give you the much-needed capital to expand/grow your business, buy new machinery, invest in automation technologies and more.

Every business loan, whether short-term or long-term, carries an interest charge. Lenders charge interest as a mode of fee for offering funds to borrowers. While some factors may get you a reduced interest rate, you cannot get away with paying these charges.

Listed below are the details about interest rates and other charges that are usually associated with a business loan. Being aware of these charges will help you avoid unnecessary surprises later on.

Interest Rates

This is the most common charge you will come across when you apply for a business loan. The interest rates are a form of fee charged by the lender for providing you with funds. Your credit score, tenure of loan, amount of loan and other factors affect the interest rates charged by the borrowers.

Business loan interest rates can be anywhere between 9.75 and 30% per year, depending on the nature of the lender. Banks and traditional financial institutions may charge lower interest rates than individual, private money lenders and fintech companies. Interest rates may be charged monthly or yearly.

Processing Fees

As the name indicates, this refers to the fee charged by the lenders for processing or handling your loan application. Lenders charge this for all the steps they do right from the time of getting your loan application to the time of the final loan disbursal.

Processing fee is charged once at the time of loan disbursal. The lenders deduct this charge from the final approved loan amount and then credit the remaining amount to the borrower’s account. 

Different lenders charge different processing charges based on the credit status of the borrowers. Some charge around 2% of the loan amount as processing, while some may charge even 4 or 5% as processing charges.

Late Payment Charges

Borrowers have to pay their loan repayments within the specified due date every month. Failure to do so will attract late payment charges. Usually, when borrowers don’t have enough funds in their accounts, they tend to miss their loan repayments. Lenders charge high charges as late payment fees for the same.

Prepayment Fee

As a borrower, you may require a business loan to meet a particular requirement. You may have opted for a loan for a specified term. However, when your cash inflow starts to improve, you may want to pay off your loans before the scheduled time and stay debt-free.

However, please be informed that lenders may charge you an amount in the name of a prepayment fee or foreclosure fee. These prepayment fees may differ based on the type of loan and the nature of lenders. Some lenders may charge you a prepayment fee even if you close a part of your loan before the due date.

Online convenience charges

Today, most lenders have moved to online sources for loan application and disbursal processes. Once all the documentations are verified and approved, lenders usually give borrowers a unique ID and password. 

Hence, they charge an amount in the name of online convenience charges for these services. It is better to know the percentages of these charges before looking for online lenders for your financial requirements.

Documentation Fee

When applying for a business loan, borrowers have to submit the required documents to lenders. Lenders need to check these documents, get back to borrowers for corrections, if any, send them to further processes if everything is alright and handle the documents properly. 

They charge a documentation fee for these services. These charges are different for different types of lenders. The nature of the loan also plays a big role in calculating these charges. It can either be a fixed charge, or a percentage of the total loan amount.

We have discussed most of the major charges that are associated with business loans in the above sections. However, there could be some of these additional charges as well when you apply for business loans:

• Bounce charges – when the cheque issued by borrowers for loan repayments bounces for lack of funds or other reasons
• Stamp duty – based on the nature of loan, geographical jurisdictions and other factors.
• Cash collection charges – applicable when borrowers pay loan repayments in cash to the collection agents appointed by lenders
• Cash deposit charges – applicable when borrowers make loan repayments in the form of cash deposits in any branch
• PG facility charges – applicable when borrowers opt to make loan payments through specific payment gateways
• Annual maintenance charges – applicable for some flexi-loans and flexi-hybrid loans based on the terms and conditions of the lenders
• Switch fees – when borrowers want to switch from one lender to another; a certain percentage of the loan amount may be charged for the same
• Broken period interest charges – applicable as per lenders’ terms where the period between the loan disbursal and the first charge of EMI is more than 30 days or less than 30 days

Bottom Line

In conclusion, navigating through the various interest rates, fees, and charges of business loans can feel overwhelming, but understanding these aspects is crucial to making informed financial decisions. With TallyCapital, not only do you get access to tailored business loans that suit your needs, but our transparent approach ensures there are no hidden costs. Plus, with our expert guidance, we help you secure the most favorable terms, so you can focus on growing your business without the stress of complicated loan structures. Let TallyCapital be your partner in building a strong financial foundation for your business.

Access to credit has improved considerably over the last ten years. When you are looking for funds, your options are plenty. You can approach a bank, financial institutions, private lenders, or the plethora of fintech companies. 

Depending on various lending parameters, you will have to choose between two loan types: secured and unsecured loans. In this blog we will take a look at the difference between the two types of loans and situations where an unsecured might be a better option.   

Secured vs unsecured loans

To know more about the advantages of unsecured loans, you should first know the difference between secured and unsecured loans.

Secured Loans – The borrower has to provide collateral to the lender for this loan. Most traditional banks provide these, as these are less risky.

Unsecured Loans – The borrower doesn’t need collateral for these loans. As long as your credit history and your repaying capacity is good, you can qualify for these loans. Banks, financial institutions and other private lenders sanction these loans regularly. These loans have an element of risk attached to them. 

Unlike popular belief, unsecured loans offer a number of benefits to the borrower. We will cover the details in the sections below.

Top 5 advantages of unsecured loans

Why should you opt for an unsecured loan? Here are some of the benefits you can enjoy when you opt for unsecured loans. However, please note that most of these benefits will apply to you only if you are disciplined in your repayment cycles.

Simple formalities

One of the most attractive features of unsecured loans is that they are very easy to process due to the following reasons:

• No time wasted in checking the value and authenticity of collateral, as there is no collateral involved 
• Easy online application for business loans with very simple paperwork involved
• Very helpful in case you are looking for quick funds for an emergency (unforeseen medical expenses, business losses, etc.)

Higher loan amount

In the case of secured loans, your bank will only sanction up to 90% of the value of collateral you have submitted. For example, if you have submitted the documents of your property worth INR 1 crore to the bank, you will be given a maximum of INR 85–95 lacs, based on your financial health.

However, in the case of unsecured loans, there is no ceiling to the amount of loans that lenders can provide you. Just your credit history and repayment capacity can get you the entire loan amount you require. However, for huge loan amounts, the interest rates may be on the higher side. So, you might want to check applicable interest rates before deciding the exact loan amount.

Flexible repayment tenure

Unsecured loans are way more flexible than secured loans. Most lenders offer flexible repayment terms for their borrowers. For example, you can either extend or reduce your loan tenure based on your financial condition.

If your credit history is good, and if haven’t defaulted on any of your loan repayments, lenders can also offer you attractive rates of interest. You can negotiate for a better interest rate than others for your future loans, if you maintain a good financial record throughout your loan tenure.

Quick loan disbursal

Since the processing time is quick and the documentation required is minimal, lenders take very little time to disburse unsecured loans. Most of the leading banks and financial institutions disburse up to INR75lacs in just about 48 hours. This makes unsecured loans a good choice, especially if you are looking for quick cash to meet emergencies or critical expenses.

Fosters cordial relationships with lenders

When you repay your unsecured loans on time every single time, it can increase your credibility in the eyes of your lenders. Sometimes, you may require more money in addition to the current loan. In that case, this credibility can stand you in good stead. 

When you maintain a cordial relationship with your lenders, you can negotiate for good rates of interest for your additional loans. Being in the good books of your lenders is very important, as it can help you anytime you need money for contingencies in the future.

Conclusion

Unsecured loans are simple and easy to process. They don’t require any collateral and they are disbursed quickly. 

Here are several reasons why TallyCapital could be the best option for your business loan needs: 

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.

Collateral-free loans

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 for our customers.

Flexible funding options

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.

Micro Small and Medium Enterprises (MSMEs) are the back of economies around the world. India is no exception, with 27% of the GDP contribution and 50% of total exports coming from MSMEs. However, these big numbers are only half the picture. According to Government data, only one-third of MSMEs make it beyond the first year. Failure to sustain business operation beyond the first year really comes down to a lack of funds. 

Small businesses face an uphill battle when it come to securing adequate working capital, expanding operations, buying new machinery, or purchasing raw materials to build inventory. Without an adequate source of funds, it’s near impossible to continue operations. While traditional loans are can be a good source of funds, banks and financial institutions hesitate to lend money to businesses without a strong history of credit.

This is where an MSME loan can be of huge help. The micro, small and medium enterprises loan provides much-needed financial help for small businesses to carry out operations without the fear of running out of money.

Top 6 benefits of MSME loans for small businesses

Easy to access

Adequate a timely funds are the lifeblood of MSMEs. When a small enterprise receives an order, they need to manufacture and build an inventory of products to meet their client’s requirement. This entire process requires funds to meet the delivery of products at every stage. An MSME loan provides easy access to finances that helps businesses plan and execute their business orders with ease. 

Thanks primarily to technological inclusions in the world of finance, most private lenders are able to disburse loans quickly. Small businesses need to provide minimal documentation along with an online form to receive their loan within 24 to 48 hours. Access to quick funds is one of the biggest benefits of an MSME loan.

Zero collateral required 

Another benefit that MSME loans offer businesses is the lack of collateral needed to acquire a loan. Small businesses often struggle to get off the ground and do no have access to property or assets to use as collateral. This makes it an ideal solution to keep their funds flowing without the need for collateral.   

Lenders primarily check credit history, business standing and overall financial health of small businesses. Once the numbers are satisfactory, an MSME loan can be acquired without the need for collateral.

Having full control of operations

One of the best things about taking out a loan, as opposed to getting outside investor/s, is that it gives business owners complete control over their business. As observed by the spate of hostile takeovers in recent times, handing over the keys of your business to an angel investor or venture capitalist is not an ideal situation. 

Outside influence can result in business owner’s losing control to outside parties that are primarily looking to make a quick buck. A loan circumvents this problem by allowing the business owner to have complete control at all times. 

Attractive rates of interest

MSME loans are meant for small businesses; therefore, their interest rates are affordable and competitive. These loans are also not too risky, because they don’t deal with high values. Therefore, you can benefit hugely from these loans, as you use almost the majority of the loan amount for the purpose intended.

Easy and customised repayment options

Some businesses need loans for a short tenure, as they are confident of repaying the same within that period. Some others, however, may need a longer tenure to repay their loans. Irrespective of your requirements, you can opt for MSME loans, as the lenders give you multiple repayment options to choose from.

Today, with many types of MSME lenders in the market (fintech companies, private lending companies, individual moneylenders, etc.), you can expect to get customised loans at reasonable interest rates and flexible repayment options from them.

Reduced taxable income

You can qualify for attractive tax benefits when you apply for MSME loans to grow/expand your small business. Every year, you are expected to file your taxes at a particular time. All you need to do is submit your MSME loan report along with your tax filing. 

The tax authorities will check the same and considerably reduce your taxable amount to the extent of the loan you have taken. This reduction in your taxable income will automatically result in a deduction in your tax liability as well.

Conclusion

With so many types of business loans and lenders available in the market, it may be a challenge to choose the one that is right for you. But TallyCapital enables you to sail through the business loan 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.