5 Common Challenges in Securing a Business Loan in India

If you’ve ever applied for a business loan or even a personal loan, you’ve probably heard the term credit score. But what does it really mean? Why do lenders care about it so much? And how can it affect your chances of getting a loan for your business? 

In this detailed guide, we’ll break down everything you need to know about credit scores in simple and practical terms. Whether you’re a small business owner exploring your first loan or already managing multiple credit lines, understanding your credit score can help you make smarter financial decisions. 

What is a Credit Score? 

A credit score is a three-digit number that tells lenders how likely you will repay borrowed money on time. It’s basically your financial health score, the higher it is, the more confident lenders feel about giving you credit. 

In India, credit scores typically range from 300 to 900. 

• A score closer to 900 means you have a strong credit history.
  
• A score closer to 300 means you have higher credit risk. 

Your credit score is calculated by credit bureaus such as CIBIL (TransUnion), Experian, Equifax, and CRIF High Mark, based on your credit behavior, factors like loan repayments, credit card usage, and credit inquiries. 

Who Calculates Your Credit Score? 

India has four main credit bureaus authorized by the Reserve Bank of India (RBI): 

1. TransUnion CIBIL
   The most widely recognized credit bureau in India. Most banks and NBFCs rely on CIBIL scores to assess creditworthiness.
2. Experian India
   Known for providing detailed insights on individual and business credit health.
3. Equifax
   Offers reports on both individuals and small businesses.
4. CRIF High Mark
   Popular among microfinance institutions and small business lenders.

Each of these bureaus uses slightly different formulas, but they all look at similar factors – repayment history, credit utilization, loan mix, and more. 

Why is Credit Score Important for Business Owners? 

When you apply for a business loan, lenders want to know one thing: 

Can you repay it on time? 

Your credit score helps them answer that question. It’s one of the first checks that lenders perform before evaluating other details like your business financials or cash flow. 

Here’s how your credit score impacts your loan process:

For Business Owners Specifically: 

• A strong credit score can help you get a larger loan amount and lower interest rate.
• A low credit score may lead to loan rejection or stricter repayment terms. 

Even if your business cash flow is strong, lenders use your credit score as a signal of reliability. It reflects how responsibly you’ve managed previous financial obligations, personal or business. 

How is Credit Score Calculated? 

Let’s simplify the math behind it. 

Each credit bureau uses its own algorithm, but the following factors generally carry the most weight:

Example: If you have a ₹2,00,000 credit limit and use ₹1,80,000 every month, your utilization is 90% which can signal high dependency on credit and hurt your score. 

Business Credit Score vs Personal Credit Score 

As a business owner, you might have two separate credit scores: 

• Personal Credit Score:
  Based on your individual financial behavior (loans, cards, etc.).
  Used when your business is small or not registered as a separate entity.
• Business Credit Score:
  Reflects your company’s financial credibility like payments to vendors, loan repayment trends, business registration, etc. This is used when you apply for a loan in your company’s name. 

Why Both the Credit Score Matter: 

When applying for a business loan, lenders often look at both your personal and business credit profiles, especially for small or partnership-based firms. If either of them shows delayed payments or defaults, it can affect loan approval. 

What Lowers Your Credit Score? 

Here are some common habits that can unintentionally pull your score down: 

• Missing loan EMIs or credit card payments
  
• Paying only the minimum amount due
• Using most of your credit limit regularly
• Applying for too many loans or cards at once
• Having no credit history at all (making it hard for bureaus to assess you)
• Defaulting or settling loans 

Even if one EMI is delayed by 30+ days, it can stay on your credit report for months and affect future loan applications. 

How to Improve Your Credit Score 

Here are practical steps that can help you build or improve your credit score over time: 

1. Pay all EMIs and credit card bills on time.
   Even one missed payment can hurt your score. Set reminders or automate payments.
2. Keep your credit utilization below 30%.
   Example: If your card limit is ₹1,00,000, try to use only up to ₹30,000 monthly.
3. Avoid multiple loan applications at once.
   Too many “hard inquiries” in a short span of time can impact your score negatively.
4. Check your credit report regularly.
   Errors happen — sometimes wrong data or closed loans show as active. Correct them immediately with the bureau.
5. Maintain old credit accounts.
   The longer your credit history, the better it looks.
6. Diversify your credit portfolio.
   A healthy mix of secured (car, home, business loans) and unsecured (credit card) loans helps.
7. Don’t close credit cards suddenly.
   Closing old accounts reduces your credit limit and history length; both can drop your score.

Also read: Easy Ways to Improve Your Business Credit Score

How to Check Your Credit Score (Free) 

You can check your credit score for free from TallyCapital. 

Here’s how: 

• Visit this page – https://tallycapital.tallysolutions.com/free-business-credit-score/
• Enter your name, mobile number, PAN and email.
• Verify your mobile number using OTP.
• Click on ‘Get Credit Score’.
• And, your detailed credit report will be displayed.  

Alternatively, you can check your credit score & business loan eligibility right within your TallyCapital plug-in — in just few minutes. 

Why Lenders Check Credit Score for Business Loans 

From a lender’s perspective, credit score acts as a risk assessment tool. It tells three key paramaters before approving a loan: 

• Will the borrower repay on time?
• Can the borrower handle additional debt?
• How stable is their financial history? 

This is why even if your business has steady revenue, a poor credit score can lead to loan rejection or higher interest rates. 

Lenders like TallyCapital use your credit profile as part of a larger evaluation, combining it with business data from TallyPrime to offer faster and fairer loan decisions. 

Common Myths About Credit Scores 

How Credit Score Impacts Business Loans 

Your credit score doesn’t just decide whether you’ll get a loan; it also affects how helpful the loan will be. 

So, if you’re planning to expand your business, buy inventory, or manage working capital, maintaining a good credit score gives you flexibility and negotiation power. 

Credit Score vs. Credit Report – What’s the Difference? 

Many people get confused between credit score & credit report the two. Here’s how they differ: 

When you apply for a loan, lenders check both – your score gives a quick view, and the report shows the full story. 

Factors that Affect Business Credit Score (for SMEs and MSMEs) 

Your business credit score is influenced by more than just repayment history. Here’s what matters: 

• Company age & registration details

• Revenue stability

• Loan repayment and outstanding amounts

• Credit payments (to vendors and suppliers)

• Public records (like tax filings or defaults)

• Business Owner’s or Partners’ credit history

How Long Does It Take to Improve Your Credit Score? 

If your score is low, consistent effort can show results in 3–6 months. But serious issues like loan defaults may take 12–24 months to recover from. 

The key is patience and consistency, lenders value long-term discipline. 

How TallyCapital Uses Credit Scores for Business Loans 

TallyCapital — the financial solution backed by your trusted Tally — leverages your credit score in addition to the business data on TallyPrime responsibly to make business loans more accessible and fairer. 

Here’s how it works: 

1. You check your credit score directly on TallyPrime. 
2. Based on your credit report and Tally data, personalized loan offers from multiple lenders are shown. 
3. You choose the best offer and apply instantly — with minimal documentation. 

Because TallyCapital already understands your business performance, it can look beyond just your credit score and offer more contextual loan options, even if your score isn’t perfect. 

Quick Recap: Key Takeaways 

• Your credit score is a 3-digit number (300–900) showing how creditworthy you are. 

• It’s one of the first parameters lenders use while evaluating business loans. 

• A score above 750 is considered excellent for business loans. 

• You can improve your score through consistent repayments, low credit usage, and responsible borrowing. 

• Both personal and business credit scores matter for MSMEs. 

• TallyCapital combines credit score with your real business performance to give fairer loan options. 

Frequently Asked Questions 

1. What is a good credit score to get a business loan?
   A score above 750 is generally considered good and improves your chances of loan approval at lower interest rates.
2. Can I get a business loan with a low credit score?
   Yes, some lenders (like TallyCapital) also consider your business data, not just your credit score.
3. How often should I check my credit score?
   At least once every 6 months, or before applying for any new loan.
4. Does checking my credit score lower it?
   No. Checking your own score is a soft inquiry and doesn’t affect it.
5. How long does it take to improve a low credit score?
   Usually 3–6 months of consistent repayments and responsible credit behavior.
6. Can I get my credit score for free?
   Yes. Every credit bureau in India allows you to get one free credit report per year.

Final Word 

Your credit score is not just a number, it’s a reflection of your financial discipline and trustworthiness. For business owners, maintaining a good score can help you get better loan offers, faster approvals, and more growth opportunities. 

With TallyCapital, you can now check your check score, view loan offers, and apply directly from your trusted TallyPrime, making credit simpler and smarter. 

India’s small and medium businesses, also known as MSMEs, play a very important role in the country’s economy because they create jobs, support local communities, and help the economy grow. Even though they work hard and have strong potential, many MSMEs struggle to get funding from banks or financial institutions. This could be due to missing documents, a lack of formal records, or not knowing how to apply for a loan. If you are planning to expand your business, buy new equipment, or improve your daily operations, funding can help you move forward with confidence. But before applying for a loan, it is important to be fully prepared. 

Here, we will discuss MSME funding preparation, which includes everything from getting your documents in order to choosing the right loan type. You’ll also learn how digital platforms like TallyCapital can make the process faster and easier.

What does funding mean for MSMEs?

Funding means getting money from a bank, financial institution, or digital lender to support business needs. For MSMEs in India, funding can be used for many purposes, like buying raw materials, expanding operations, hiring staff, upgrading equipment, or simply managing day-to-day expenses.

There are different funding options available for MSMEs, including working capital loans, term loans, government-backed schemes, and even funding through fintech platforms. Each option has its benefits, interest rates, and repayment terms.

For any MSME, having access to the right kind of funding at the right time is important. It helps your business grow steadily and handle challenges without financial pressure. However, to get that support, you need to be ready with proper records, clear plans, and formal processes.

Step-by-step process to prepare your MSME for funding

Now that you understand what funding means and why it matters, let’s look at how you can get your business ready. Each step below will help you build a strong foundation so that lenders trust your business and are more likely to approve your loan.

Step 1: Understanding the government support available

The Indian government has introduced several schemes to make it easier for MSMEs to get funding. Before applying for a loan, it’s important to know which schemes you qualify for and how they can benefit your business.

• Udyam registration: This is the first step for any MSME. It helps you become a recognised business and gives you access to various benefits like lower interest rates, easier loan approvals, and government subsidies.
• CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises): This scheme provides collateral-free loans to eligible MSMEs. It offers a credit guarantee cover of up to ₹5 crore, reducing the risk for lenders. This means you can apply for a loan even if you don’t have property or assets to offer as security. Many banks and NBFCs offer loans under this scheme, making it a useful option for small businesses.
• MUDRA loans: These loans are designed for micro and small enterprises engaged in manufacturing, trading, or service activities. Based on the size and stage of your business, you can apply under three categories: Shishu (up to ₹50,000), Kishor (₹50,001 to ₹5 lakh), and Tarun (₹5 lakh to ₹10 lakh). MUDRA loans come with simple eligibility criteria and no collateral requirement.
• Stand-up India scheme: This scheme supports SC/ST and women entrepreneurs. It provides bank loans between ₹10 lakh and ₹1 crore for setting up a new enterprise in manufacturing, services, or trading. 

Knowing about these schemes and how they work can help you choose the right one and increase your chances of getting approved for a loan.

Step 2: Keeping your financial records updated and accurate

To improve your chances of getting funding, your business must show that it is financially healthy. Lenders carefully review your financial records to understand how well your business is performing and whether it can repay the loan on time.

To make sure your records are in good shape, focus on the following:

• Use accounting software: Tools like TallyPrime make it easier to record daily transactions, track expenses, manage GST filings, and generate reports such as profit and loss statements, balance sheets, and cash flow summaries. These reports are often required by banks during the loan application process.
• File tax returns regularly: Make sure your income tax returns (ITR) and GST returns are filed on time. Lenders treat regular tax filing as a sign of a stable and responsible business.
• Avoid errors and mismatches: Incorrect or missing information in your financial data can lead to delays or even rejection. Check your records for accuracy before submitting them to any lender.

Strong and well-maintained financial records build trust with banks and financial institutions and show that you run your business professionally.

Step 3: Preparing a clear business plan

A well-written business plan helps lenders understand your business goals and how you plan to use the funds. It shows that you have a strong vision and a practical approach to growth, which builds confidence among lenders.

Here’s what your business plan should include:

• Business overview: Explain what your business does, who your customers are, and what makes your product or service unique.
• Purpose of the loan: Clearly state why you need the funds, whether it’s to buy equipment, increase inventory, hire staff, or expand operations.
• Revenue model: Show how your business earns money. Include past sales data and future revenue projections to show that your business can repay the loan.
• Repayment plan: Mention how you plan to repay the loan, monthly income, expected profits, or cost savings from the investment.
• Growth potential: Highlight how the funding will help your business grow in terms of scale, market reach, or profitability.

Step 4: Knowing your funding options

Apart from the government support available, you can also explore business loan options. Not all loans are the same. Choosing the right type of funding depends on your business needs, how much money you need, and how soon you can repay it. Understanding your options will help you make better financial decisions and avoid unnecessary debt.

Here are some common funding options for MSMEs in India:

• Working capital loans: These loans help manage daily business expenses such as salaries, rent, and utility bills. They are short-term loans meant to keep your operations running smoothly.
• Term loans: If you need funds for a larger investment like buying machinery or setting up a new unit, term loans are a good option. They usually have fixed interest rates and repayment schedules.
• Overdraft facility: Banks may allow you to withdraw more than your account balance up to a limit. This is useful for short-term cash flow gaps and is usually linked to your business income.
• Digital lending platforms: Fintech companies and platforms like TallyCapital offer quicker approvals and minimal paperwork, helping businesses apply for MSME loans without any hassle.

Step 5: Checking your credit profile

Your credit score plays a key role in getting a loan. Lenders use it to check your past repayment behaviour and financial discipline. A strong credit profile increases your chances of getting approved and may even help you get better interest rates.

Here’s what to keep in mind:

• Check your credit score regularly: A score above 700 is generally considered good for business loans.
• Clear any outstanding dues: Repay old loans, credit card bills, or pending EMIs. Any delay or default can negatively impact your score.
• Avoid multiple loan applications: Applying for several loans at once may reduce your score, as it shows credit hunger. Apply only when you’re ready and confident.
• Build a credit history: If your business is new and has no credit history, consider starting with a small loan or a business credit card and repay it on time to build trust with lenders.

Step 6: Organising all required documents

When applying for a loan, submitting the correct documents is just as important as having a strong business plan. Proper documentation speeds up the approval process and reduces the chances of rejection.

Make sure you have the following:

• Business registration proof: Udyam Registration Certificate, GST registration, or other relevant business licences.
• KYC documents: PAN card, Aadhaar card, and address proof of the business owner or partners.
• Bank statements: At least 6–12 months of business bank account statements to show income and expenses.
• Financial statements: Profit and loss statement, balance sheet, and cash flow statement, preferably prepared using accounting software like TallyPrime.
• Tax returns: Latest income tax returns and GST returns filed for the business.
• Loan-specific documents: Some lenders may ask for additional documents like project reports, sales invoices, or quotations, depending on the loan type.

Step 7: Choosing the right lending partner

Selecting the right lender is just as important as preparing your documents. Different lenders offer different terms, interest rates, and approval processes. Choosing the one that matches your business needs can make the funding process smoother and more beneficial.

Here’s how to make the right choice:

• Compare loan offers: Look at interest rates, processing fees, repayment terms, and eligibility criteria from different banks, NBFCs, and digital lenders.
• Check the lender’s credibility: Always go with trusted financial institutions or RBI-approved NBFCs and fintech platforms.
• Understand the process: Choose lenders that offer simple and quick application processes, especially if you need funds urgently.
• Look for MSME-friendly platforms: Platforms like TallyCapital are designed especially for small businesses. They understand MSME needs, use your digital data (like Tally reports), and offer faster approvals with minimal paperwork.

Conclusion

Getting funding for your MSME is all about showing that your business is ready to grow. When you keep your records clean, understand your options, and choose the right lender, you increase your chances of getting approved.

If you’re looking for a trusted partner, check out TallyCapital. It connects small businesses like yours with lenders who offer quick approvals, simple steps, and less paperwork. Supported by the trusted name of Tally, it makes getting a loan easier and faster.

You can also explore the TallyCapital Blog for helpful tips, government scheme updates, and expert advice to guide your funding journey.

When you want your business to grow, you need to raise funds. There are multiple funding options for business owners, but two very common methods are debt financing and equity financing. While the former involves taking a business loan, and therefore, you remain in control of your business, the latter involves getting a partner on board through investment, but at the cost of having your business decisions influenced by the partner/investor.

Both, debt and equity financing, are used for raising funds, and each has its own set of pros and cons. So, what is the difference between the two? Which is the best for your business? This blog explores the different aspects of debt vs equity funding to help you make the right choice.

What is debt financing?

Debt financing is the process where your business borrows money or takes a loan or cash advance loan from a private lender, bank, or non-banking financial institution at a predetermined rate of interest. The loan amount and the interest need to be paid back as per an agreed-upon duration in instalments. The money comes to your business upfront so that you can immediately put it to use for business growth.

There are two types of debt financing – secured and unsecured. For the former type, you will need to submit collateral and the latter doesn’t need any guarantee. In debt financing, the money has to be repaid, come what may.

Benefits of debt financing

The advantages of choosing debt financing for your business are:

• Economical option compared to equity financing

The cost of debt is usually lower during the early phases or the growth stage of the business. The interest payments are mostly tax deductible, meaning the taxable income of the company and the overall tax liability is reduced. Also, debt does not translate into sharing of profits later on, making it cost-effective in the long run, especially if your business is already profitable or is growing.

• Zero equity dilution

One of the biggest benefits of debt financing is that business is completely under your control. Ownership is 100% yours and so is the decision-making authority, be it business operations, strategic decisions, or long-term goals. In contrast, in equity financing, investors have a say in key decisions, leading to dilution in control.

Downside of debt financing

Debt financing can provide quick access to capital, but it also comes with certain risks and obligations that businesses must carefully consider.

• Loan repayment is a must

The capital raised in the case of debt financing is a loan; therefore, it must be repaid along with interest. This is regardless of whether you are making profits or running into losses. You are obligated to make repayments as per pre-decided schedules, straining the cash flow. This may not be easy, especially during the early stages of the business.

• Restrictive lender clauses

The lender can attach covenants like minimum cash reserves to the loan, prohibiting certain moves, or maintaining specific financial ratios. Restrictive clauses like these can limit operational flexibility.

What is equity financing?

In this form, your business raises capital, but to do so, it has to sell ownership stakes to interested investors. The investors in this case are allotted company shares, which make them partial owners of your business. They are also entitled to a percentage share in the profits.

Who can be the investors? Anyone, from your family members, friends, the public, venture capitalists, private equity firms, and angel investors. One of the core differences in debt vs equity funding is that there is no repayment clause. Hence, no interest payment on the capital raised. However, since the investors are partial owners now, they have a say in business decisions, which means that your autonomy or complete control over your business ceases.

Benefits of equity financing

Businesses can enjoy the following benefits if equity financing:

• No pressure of loan repayment

In this form of financing, capital is raised without any requirement of monthly repayments. This is a boost to startups and companies in the initial stages when funds are required to grow, but they lack consistent cash flow to make regular payments.

• Insights from professional investors

This is a big help for startups and small businesses that are just starting. Equity investors do not just lend money but bring more to the table. Their industry experience is used for mentorship, networking opportunities, and boosting business growth.

Downside of equity financing

Some of the disadvantages of taking equity financing are:

• Equity dilution

Giving up a part of your ownership stake means giving up a part of the control to another person or entity. Investors want to participate in key business matters. With differing opinions, there could be conflicts.

• Can cost more as your business grows

Equity financing can be an expensive option for raising funds. As the business starts to grow, the equity given up earlier can become a costly deal. Future profits and ownership with investors may outbalance the initial benefits of raising funds.

Debt vs equity financing: The difference

Here’s a synopsis of how the two forms of raising capital differ.

Debt vs equity financing: Which is the best option for you

Both options have their own sets of advantages and flaws. Hence, choosing between debt and equity financing is a critical decision for any business. Debt offers control but comes with repayment obligations, while equity provides capital without immediate repayment but dilutes ownership.

Debt vs equity financing: Key factors to consider

Whether and which option suits your business depends mostly on certain factors. These include – 

• The growth stage of your business
• The capital, or the amount that you are looking to raise
• The purpose of raising capital and its intended use
• The values of the owners (control versus no control)

Debt vs equity financing: Suitable conditions

Certain scenarios suit debt financing while others are appropriate for equity funding. Here a brief – 

Consider debt financing if 

• Your individual credibility is sound, and your business financials are strong.
• You expect the returns to be attractive enough to bear the scheduled repayments.
• Your financial background allows you to take the risk because in case there are no profits, you will need to repay from your pocket
• You want to earn the maximum in the event the business gets sold.

Consider equity financing if

• You do not want to get into debt, as it is risky and requires regular repayments.
• You have just started your business, and the growth to become profitable will take some time.
• You need a mentor to guide you and help you with networking within the industry.
• You do not mind sharing control with investors for the better future of the business.

Conclusion

There is no right or wrong choice when deciding on debt vs equity funding. Both are good and viable options, highly popular with businesses that want to grow. Which is better for you? It all depends on your business goals, your approach towards risk, and the stage of growth of the business. While debt lets you retain ownership, equity brings in expertise and shared risk. 

You don’t have to decide alone, though. With TallyCapital, you can assess the financial standing of your business, based on which you can choose the best financing strategy, aligned with your long-term vision.

While the startup buzz is catching up fast with newbie entrepreneurs, there are many challenges too. Though India has a strong startup ecosystem, many Indian startups have failed to sustain due to improper financial planning and management. The failure, in most cases, is not because the idea was not great, but because it was not executed well. 

This blog talks specifically about the tools and tips for successful financial planning by startups, including leveraging government schemes for MSMEs, making the best use of business loans, and working capital loans.

Tools & tips for a successful start-up financial plan

Building a solid financial plan is the cornerstone of every successful start-up. With the appropriate tools and handy tips, you’ll be able to manage cash flows and project expenses effectively and start making intelligent business decisions from day one.

Start with a budget

For a startup or an established business, budgeting is the first step. This gives you an insight into the income and expenses of your business. Create a list of income sources and expense heads. This gives you a clear idea of the way forward and how to balance earnings and expenses.

Create a financial plan

A financial or business plan is the next important resource for financial planning. It is like a roadmap and a must to attract investors or a working capital loan. Typically, the business plan should cover heads and sub-heads like initial capital requirements, projected income and expenses, break-even analysis, cash flow forecasts, how to fund, and so on.

Keep a close eye on cash flow

For any business, cash flow is the lifeblood. Remember, poor cash management can become an obstacle for even the most promising startups. You can do this by preparing cash flow statements month-to-month, negotiating payment terms, avoiding unnecessary expenses, and using accounting software like TallyPrime.

Personal and business finances should be separate

Open a separate business banking account if you have long-term growth plans for this business. At all costs, your personal and business accounts and finances should be separate. Mixing the two can complicate matters, especially during tax filing. It will also adversely impact the financial health of the company.

Leverage government schemes for MSMEs

The Indian government supports different MSME schemes designed to promote entrepreneurship. Some of these include –

• Credit  Guarantee Fund Trust for Micro and Small Enterprises, where credit is offered without any collateral.
• Pradhan Mantri MUDRA Yojana loan, where businesses can take up to 10 lakh as a loan, depending on their category.
• The Startup India Seed Fund Scheme helps new entrepreneurs with prototype development, product trials, proof of concept, etc.

Fund your startup

Consider different sources of business loans for MSMEs. Some of the common options include – bootstrapping, where you use your money to start the business, seek funding from venture capitalists or angel investors, take business loans for MSMEs that are designed for micro and small businesses, or take loans from banks and Non-Banking Financial Corporations.

Maintain financial discipline

Startup success depends a lot on making a realistic business plan and financial projections. Hire experienced accountants and legal experts to make sure that the finances of the business are smartly managed, be it tracking cash flows, planning strategic growth, or making wise financial decisions.

Tax and compliance planning

Don’t underestimate the complexity of tax planning and compliance. Your business will need to register for GST if the turnover exceeds the threshold. In the case of interstate supply, too, GST registration is a must. Have a clear understanding of tax deductions and benefits for startups. You will also be required to file returns on time, including TDS, GST, and income tax.

The right financial tools matter

Your startup will need a few tools to help you with financial management. This includes –

• Accounting and bookkeeping tools for GST filings, automating ledgers and invoices
• Payroll Management tools for timely payments to employees and ensuring PF/ESI compliance
• Billing and Invoicing tools for automated invoices and bill generation.
• Cashflow analysis tools to keep an eye on what cash is coming in and what is going out.
• Expense tracking tools to automate expense entry, review, and approval processes.
• Budgeting tools for real-time tracking of expenses vis-a-vis budgets.
• Loan management tools to monitor loan EMIs, repayment schedules, etc.

Monitor and adjust regularly

Reviewing the settings from time to time is important. You cannot set it for once and then forget all about it. As the business evolves, scenarios change. Costs change, cash flows change, and so do revenues. You need to monitor the financial goals once every quarter. Your comparison of actual vs projected should be monitored too. Gain enough agility so that adapting to new scenarios is easy and fast.

Conclusion

Whether it involves budget creation, managing expenses, or staying GST-compliant, you need the right tools that empower proactive planning and decision-making for your business. TallyCapital is a comprehensive solution that helps you manage your finances with clarity and confidence. It also provides financial insights, digital tools, and expert guidance, all in one place.

Raising capital is one of the most important steps in growing a business. However, doing it too early or late can affect your finances, operations, and long-term success. Whether you’re an MSME owner planning to expand, manage cash flow, or invest in new opportunities, knowing when to raise capital for your business and how to choose the right funding option is very important.

Many business owners struggle with this decision, not because they lack ambition, but because they’re unsure of the right timing or financing method. Choosing the wrong type of loan or raising funds without a clear plan can lead to financial stress instead of growth. That’s why having the right guidance makes all the difference.

In this article, you’ll learn when to raise capital, how to select the best business loans, and how to grow smartly.

When to raise capital for a business?

Raising capital is a big decision, and timing plays a major role in making it work. Here are some common situations when it makes sense to look for funding:

• You’re ready to expand: If your business is doing well and you plan to open a new branch, hire more staff, or enter new markets, extra funds can help you grow faster without affecting daily operations.
• Cash flow management fluctuates: Sometimes, your income may not come in regularly, but expenses like rent, salaries, and inventory don’t wait. A short-term loan or working capital support can help you manage these gaps smoothly.
• You want to upgrade equipment or technology: Investing in better tools or systems can improve efficiency and increase profits. Raising capital at this stage helps you stay competitive and meet growing customer demands.
• You see a good opportunity: If a new project, client, or partnership needs quick action, having funds ready or access to credit can help you take advantage of the opportunity without delay.
• You want to improve financial stability: Sometimes, businesses raise capital to reduce high-interest debt or to have a safety net during uncertain times. It’s a smart move when planned properly.

How to choose the best business loan for your company?

Once you’ve decided to raise capital, the next step is choosing the right loan. However, the question is – with so many options available, how do you pick the one that truly fits your business? Here are some simple ways to make a smart choice:

• Understand different loan types

Business loans come in many forms, such as term loans, working capital loans, equipment financing, lines of credit, and more. Learn what each type is used for. For example, if you need flexible access to money over time, a line of credit may work better than a one-time loan.

• Check eligibility and documents required

Each lender has their own rules. Before applying, see if your business meets their eligibility criteria, like minimum turnover, years in business, or credit score. Also, keep documents like bank statements, GST returns, and business registration ready to speed up the process.

• Compare lenders, not just interest rates

Interest rate is important, but don’t stop there. Look at the total cost of the loan, including processing fees, late payment charges, and foreclosure rules. Also, check how fast the lender disburses funds and whether customer service is reliable.

• Look for MSME-friendly options

If you’re a small or medium business, take advantage of MSME loan schemes that offer benefits like lower interest rates, no collateral, or government support. These are often better suited to early-stage or growing businesses.

• Think long-term, not just short-term

A loan may look attractive now, but will it still make sense after six months or a year? Choose a loan that supports your future goals without putting pressure on your cash flow.

• Read the fine print

Before signing, always read the full loan agreement. Understand terms like EMI dates, penalties, and lock-in periods. Ask questions if anything is unclear.

Tips for smart capital use

Raising capital is only half the job. Using it wisely is what drives real growth. Here are a few simple tips to help you utilise your capital smartly:

• Plan your spending: Know exactly where the money will go before using it.
• Focus on growth areas: Invest in improving products, operations, or customer reach.
• Track expenses: Keep records to avoid overspending and stay on budget.
• Don’t mix personal and business use: Always keep your business funds separate.
• Save a little for emergencies: Set aside a small portion as a backup.
• Review regularly: Check if the funds are helping and adjust your plan if needed.

Common types of business loans you should know

There are different types of business loans available to suit different needs. Here’s a quick comparison to help you understand which one might be right for your business:

Final thoughts

Raising capital doesn’t have to be confusing. With the right timing, a good loan, and a clear plan, you can confidently grow your business. What matters most is making informed choices that support your goals. At TallyCapital, we make that easier for you. From helpful tips to funding options designed for MSMEs, we give you the support you need to move forward.

Want to take the next step with confidence? Reach out to TallyCapital today!

Successful businesses are not created overnight. Setting up a strong enterprise requires extensive planning and an optimal capital structure, which is mostly composed of business owner’s funds, angel investments, the best-unsecured loan, or a combination of all. When it is the loan that builds your capital, responsible loan management becomes crucial. If done well, it helps to free up cash flow for reinvestment, boosts growth, and fuels expansion. 

While taking up a loan has become simpler, ensuring timely repayment has become a big struggle, especially for smaller businesses. Hence, whether the business is seeking new business loans or repaying older ones, effective repayment scheduling is important as it ensures building a positive brand image, a solid credit score, etc., allowing businesses to meet future borrowing needs and boost credibility. 

Why is smart repayment planning crucial?

When revenue streams decline, economic cycles change, or expenses rise, it may become tough to repay business loans for small businesses. Missing timely payments, however, adds to the financial strain with rising business debts and poor financial ratios. 

Lack of planning for these existing business loans for small businesses can result in –

• Penalties
• Disrupt your financial ratios
• Lower credibility and credit scores
• Problems in securing new business loans
• Disruptions in business operations

With the right planning, small businesses can repay their business loans on time. However, before choosing a repayment plan or strategy, it is important to carefully check the terms and conditions, interest rates, repayment schedules, etc. of your loan. 

Managing loan repayment with smart strategies

A smart repayment strategy is a must to make sure a business runs smoothly without any monetary interruptions. Here are some tips to help you stay on top of your repayments without overburdening your operations:

1. Create a realistic repayment plan

Before taking any loan, assess your business’s monthly income and expenses to determine how much you can comfortably repay. Choose a loan tenure and EMI amount that won’t disrupt your working capital. Avoid overestimating future income while planning your repayment schedule. A well-thought-out plan ensures you don’t default and keeps your credit profile healthy.

2. Maintain an emergency fund

Setting aside a portion of your profits each month in an emergency fund can be a lifesaver. This reserve can be used during low-revenue periods or when unexpected costs arise. It acts as a financial buffer, allowing you to continue loan repayments even during tough times. This proactive step adds resilience to your repayment strategy.

3. Make repayments a part of your operating budget

One of the most effective ways to manage business loans is by treating repayments as a fixed part of your monthly operating expenses. Start by assessing your current financial position, including your cash flow and monthly commitments. Determine a realistic budget that accommodates EMIs without straining other business operations. Factor in seasonal slowdowns and potential contingencies to stay prepared. This approach ensures consistency in repayments and protects your business from sudden financial stress.

4. Prioritise cash flow management

Cash flow is the lifeblood of any business and plays a critical role in timely loan repayment. Without steady and positive cash flow, it becomes challenging to meet existing obligations or qualify for new business loans. To ensure you have funds available for repayments, monitor your cash inflows and outflows closely. Adopt practices like early invoicing and follow-up on payments to maintain liquidity and avoid repayment delays.

5. Make early repayments (if possible)

Opting for early loan repayments can be a smart financial move for businesses. It helps reduce the overall interest burden, allowing you to save money in the long run. By clearing debt sooner, you also free up funds that can be redirected to other investments or operational needs. Additionally, early repayments can improve your debt-to-equity ratio, enhancing your company’s financial health and creditworthiness. It is also recommended to check pre-payment charges for your business loans for small businesses.

6. Keep in touch with your lender

Most institutions provide the ease of repayment of business loans for small businesses if approached early. If you anticipate difficulty in making a repayment, reach out to your lender in advance. Many financial institutions offer temporary relief options like EMI moratoriums, restructuring, or flexible payment plans. 

Tips for securing a strong financial position during loan repayment

Making repayments for a loan involves a heavy cash outflow for any business. In such a situation, it becomes difficult to secure a solid financial position. Here are a few tips that can help you ensure retaining your financial status while making timely repayments simultaneously.

• Review all your existing loans, suppliers, and logistics costs. This is a great idea for securing new savings opportunities.
• Diversifying income by adding new products or services is best. Choose ideas that require minimal capital investments.
• Adequate planning and financial management during peak months help to repay all the new business loans easily during lean months. 

Real-world scenario

Take the example of XYZ cafe, which took ₹10 lakh as a new business loan to cover interior and advertising costs. Instead of waiting for higher profits, the owner set up an auto-deduct repayment schedule to repay all its business loans for small businesses.

The management also created a pudding fund to manage repayments during lean months, which helped to keep cash flows smooth. As a result, XYZ Cafe managed to repay it in 18 months instead of 24 months. This shows how efficient repayment planning can help businesses save on interest and improve their overall credit standing.

Conclusion

Paying off your business loans is easy through careful planning. With the best-unsecured loan from TallyCapital, you can easily manage your short-term liabilities. You can apply directly from TallyPrime, with minimal paperwork and a fully digital process. Enjoy quick approvals, flexible repayment options, and collateral-free funding tailored to your business needs.

With TallyCapital, you get hassle-free business loans and real-time tracking, ensuring a seamless borrowing experience from start to finish.

Having a good business credit score is very important for any company. It shows how trustworthy your business is when it comes to handling money. A strong credit score can help you get loans easily, work with better suppliers, and even get better deals on payments. Whether you’re starting a new business or already running one, improving your business credit score can make a big difference. It helps your company grow, builds trust with banks and partners, and gives you more financial freedom.

In this blog, we’ll walk you through simple steps you can take to improve your business’s credit score. You’ll also learn how to check your credit score free online and keep track of your progress.

Why business credit score matters?

Your business credit score shows how well your company handles money and pays its bills. Just like personal credit scores, it helps others decide if they can trust your business financially.

Banks, suppliers, and even new customers may check your credit score before working with you. If your score is high, they’ll feel more confident giving you a loan or offering you better payment terms.

In short, a good business credit score helps you:

• Get loans more easily
• Pay lower interest rates
• Build stronger relationships with suppliers and partners

That’s why improving and keeping a good credit score is important for every business.

Steps to improve your business credit score

Here are some actions you can take to boost your credit score and make your business look more trustworthy to lenders and partners:

• Register your business properly

Make sure your business is set up legally as a company (like an LLP, Pvt Ltd, or sole proprietorship). Also, get an EIN (Employer Identification Number) as it works like a business PAN number and helps in building your credit record.

• Open a business bank account

Keep your business money separate from your personal money. Use a business bank account for all company-related income and expenses. This shows that your business is well-organised and financially responsible.

• Get a D-U-N-S number

Apply for a D-U-N-S number from Dun & Bradstreet. It’s like a unique ID for your business and is often used by banks and credit bureaus to track your business credit history.

• Use a business credit card

Apply for a credit card in your business’s name and use it for regular expenses. Make sure you pay the bill on time and don’t spend more than you can afford. This helps build a good credit history.

• Work with vendors that report to credit bureaus

When you buy goods or services from suppliers, ask them to report your payment history to credit bureaus. Regular, on-time payments help improve your score.

• Keep an eye on your credit reports

Check your business credit reports regularly to make sure there are no mistakes. If you spot any wrong information, get it corrected quickly to avoid problems.

• Always pay on time

Late payments are one of the biggest reasons for a low credit score. Make it a habit to pay your bills before the due date. This builds trust and keeps your score healthy.

How to check your credit score for free online with TallyPrime?

Did you know you can now check your credit score free online directly through TallyCapital?

TallyPrime makes it easy for business owners to keep track of their credit health without needing to visit multiple websites. With its built-in credit score feature, you can view your business credit card score in just a few clicks—right from your Tally dashboard.

Why use TallyCapital to check credit scores?

• Quick & free access – You can check your credit score free anytime.
• Real-time insights – See updated credit scores and reports to understand where your business stands.
• Business-focused – Get score details that matter for business decisions, loan approvals, and supplier confidence.

Final thoughts

Improving your business credit score isn’t something that can happen overnight—but with the right steps, it’s completely doable. From managing payments on time to keeping your financial records clear, every small action counts. With TallyCapital, you can stay on top of your business finances and even check your credit score online for free without any hassle. When your accounts are well-managed and your credit score is healthy, it becomes much easier to grow your business with confidence.

Getting a business loan is a big step for any small business owner as it can help grow the company, manage cash flow, or invest in new opportunities. However, many business owners hesitate to take a loan because of some common myths and confusion surrounding it. You might have heard things like “loans are only for businesses in trouble” or “you must have perfect credit to qualify.” These statements are not always true and believing them can stop you from getting the help your business needs. Nowadays, business loans are more flexible, accessible, and affordable than ever before. From using a business loan EMI calculator to understanding business loan interest rates, there are tools and options that make borrowing easier, even for small businesses.

In this article, we’ll clear up the biggest myths about small business loans. You’ll learn the facts, get helpful tips, and feel more confident about making the right decision for your business.

Common business loan myths and facts

Many small business owners have several misconceptions about loans and this can stop them from getting the money their company needs to grow.  Let’s look at the most common myths and understand what’s really true.

Myth 1: Business loans are only for failing or struggling companies

This is one of the most common misunderstandings. People often think that only businesses facing losses or financial trouble need loans. However, in reality, even healthy and growing businesses take loans for many good reasons.

You may need a loan to:

• Open a new shop or office
• Buy equipment or vehicles
• Hire more staff
• Stock up on inventory before a busy season
• Improve your cash flow

A business loan can help you take advantage of new opportunities and grow faster. It’s not a sign of failure, it’s a smart way to manage and build your business.

Myth 2: You must have a perfect credit score to get a loan

While having a good credit score is helpful, it’s not the only thing that matters. Many lenders look at your overall business health, not just your credit score.

Creditors may also consider:

• Your monthly income and expenses (cash flow)
• How long you’ve been running the business
• Your repayment history
• Your business documents and bank statements

Some lenders even offer loans to businesses with average or low credit scores. So don’t assume you won’t qualify. It’s always worth checking with different lenders.

Myth 3: Business loans are hard to apply for and take a long time

In the past, applying for a loan was time-consuming and required a lot of paperwork. However, now, the process is much faster and simpler, especially with online lenders.

Many creditors now offer:

• Quick online applications
• Fewer document requirements
• Fast approval and disbursal (sometimes within 1–3 days)

You can apply from your home or office and track the status online. If your documents are ready, the process becomes even smoother.

Myth 4: Business loan interest rates are always high

Not all business loans have high interest rates. The rate depends on many things like:

• Your credit score
• Your business income
• The type of loan
• The lender you choose

That’s why it’s important to compare different loan offers. You can also use a business loan EMI calculator to check how much you’ll need to pay every month. This helps you plan better and avoid surprises later. With the right research, you can find a loan with an interest rate that suits your business needs.

Myth 5: You must provide collateral to get a loan

Many business owners think they need to pledge property or assets as collateral to get a loan. While some loans are secured (which means they need security), many small business loans today are unsecured. Unsecured loans are given based on your income, business strength, and repayment history. You don’t need to pledge any property or machinery. These are a good option for small businesses that don’t own many assets but need quick funds.

Myth 6: Only banks offer business loans

Banks are not the only lenders providing a business loan. Today, there are many other options to obtain loans for small businesses, such as:

• NBFCs (Non-Banking Financial Companies)
• Online loan providers
• Government-backed schemes
• Peer-to-peer lending platforms

These options often have faster processing, less paperwork, and more flexibility than traditional banks. Exploring different lenders helps you find a loan that fits your needs best.

Myth 7: Business loans can only be used for certain things

Some business owners believe they can only use the loan for specific things, like buying machines or stock. However, most business loans can be used for many other operational needs.

You can use your loan to:

• Pay salaries
• Buy raw materials
• Upgrade your business tools or software
• Do marketing and advertising
• Handle day-to-day expenses

Just make sure to check the loan terms with your lender. Some loans (like machinery or working capital loans) may have specific rules, but many are flexible.

Wrapping up

Believing in loan myths can hold your business back. However, once you know the facts, you can make smart decisions with confidence. Whether you’re applying for your first business loan or comparing offers to get the best deal, understanding how loans work is the first step. At TallyCapital, we make business financing simple and stress-free. We work with trusted lenders to provide small businesses with quick, flexible, and reliable loan solutions designed to match their unique needs.

Looking to grow your business with the right financial support? Let TallyCapital guide you every step of the way.

Running a business often means spending money before you earn it. You might need to invest cash for inventory, salaries, rent, equipment, or marketing even before the income starts flowing in. That’s where the necessity of business funding comes in. 

Whether you’re just starting out or already running a business, you’ll likely need extra money at some point. A business loan can help you find that additional fund. However, many business owners make the mistake of waiting until the last minute to secure a loan, only to face a cash crunch. This approach can lead to delays in getting funding, higher interest rates, or even loan rejection. That’s why it’s so important to plan for funding in advance.

Let’s understand why early planning is important and how to do it step by step.

Why planning early for business funding is important?

Planning early for business funding can make a big difference when it comes to the smooth functioning of your company. Thinking about loans only when you’re already short on money can be risky, as it may be too late to secure the best deal—or even get approved at all.

Here’s why it’s important to plan for  a business loan in advance:

1. Loan approvals take time

Getting a business loan isn’t instant. The process involves submitting documents, waiting for checks and approvals, and sometimes even follow-up questions from the lender. Depending on the creditor and the type of loan, it can take a few days to several weeks. If you apply at the last minute, you may not get the money when you need it most.

2. You need time to prepare documents

Most lenders ask for business documents like:

• Income statements
• Tax returns
• Bank statements
• Business registration proof

If your documents are not ready or updated, you might face delays. Planning ahead gives you time to prepare and organise everything properly.

3. Your credit score matters

Lenders check your personal and business credit scores before approving a loan. If your credit score is low, you might get rejected or offered a loan at high interest rates. However, the good news is credit scores can be improved with time. By planning early, you can work on increasing your score before applying.

4. You get better loan choices

If you plan efficiently, you don’t have to take the first loan offer you get. You’ll have time to:

• Compare interest rates
• Check repayment terms
• Choose between secured and unsecured loans
• Avoid high processing fees

This helps you find a loan that fits your business needs without extra costs.

5. You can grab business opportunities

Sometimes, a good business opportunity comes up like buying stock at a discount or opening a second location. If you’ve already planned your funding, you can act quickly without worrying about money. Businesses that plan ahead are always in a better position to grow.

6. Less stress, more control

When you’re not rushed, you can make clear decisions. You’ll have time to review loan terms, ask questions, and understand what you’re signing. This reduces the chance of mistakes or regrets later.

Plan your business funding: A step-by-step approach

Let’s understand the simple steps to plan and apply for a business loan, especially if you’re looking at options like unsecured loans. These steps will help you figure out how much money you need, when to apply, and how to obtain funding.

Step 1: Understand your business needs

Start by asking yourself: “Why do I need this money?”

Some common reasons are:

• To buy inventory or raw materials
• To pay for salaries and day-to-day expenses
• To buy new equipment or tools
• To open a new shop, warehouse, or office

Also, think about how much money you need. Try to be exact. Don’t guess. Use past sales data and your future operational plans to calculate.

Step 2: Know the types of loans available

There are different kinds of loans available for different business needs:

• Unsecured loans: These are loans where you don’t need to give anything as security. You just need a good credit score and business records. The loan approval process is faster but the interest rate may be higher.
• Secured loans: Here, you give something valuable (like a shop or machine) as collateral. These loans take longer to process but usually have lower interest.
• Working capital loans: Short-term loans that help with regular business expenses like salaries, bills, or stock.
• Government schemes: In India, there are special loans for MSMEs (Micro, Small, and Medium Enterprises) with lower interest and easier rules. You can check if your business qualifies for any of those.

Pick the loan type that matches your business goals.

Step 3: Use a business loan calculator

Before taking a loan, use a business loan calculator. This free online tool helps you check:

• How much EMI (monthly payment) you’ll need to pay
• The total amount you’ll pay back with interest
• If you can afford the loan based on your monthly income

It’s a quick way to see if a loan is right for you before applying.

Step 4: Improve your financial health

Lenders want to be sure you can pay back the loan. So, they check:

• Your business income and profits
• Your credit score (personal and business)
• Past tax returns
• Your existing debts, if any

To get your loan approved easily:

• Pay off old debts, if possible
• Keep all your financial documents ready and up to date
• Make sure you file your taxes on time
• Work on increasing your credit score

Doing these things 3–6 months before applying for a loan can greatly improve your chances.

Step 5: Apply at the right time

Timing is everything. You don’t want to wait until your business is low on cash.

Here’s a general guide:

• If you’re starting a new business – Plan at least 6 months early
• If you want to expand or buy new equipment – Start looking 3 to 4 months in advance
• If you need money for working capital – Apply 1 to 2 months before the need arises

Applying early gives you time to:

• Compare offers
• Fix any credit issues
• Negotiate better loan terms

Step 6: Compare loan offers

Don’t rush into the first loan you find. Different lenders offer different:

• Interest rates
• Loan tenures (repayment time)
• Processing fees
• Rules for early repayment

Use online platforms or consult a loan advisor to compare multiple offers side by side. Look beyond just the interest rate, see the total cost of the loan, and whether the terms suit your business.

Final thoughts

Planning ahead for business funding gives you a big advantage. It helps you make smarter decisions, get better deals, and grow your business at the right pace. At TallyCapital, we make that planning easier for MSMEs. Whether you’re looking for an unsecured business loan, comparing different options, or just trying to understand your EMIs using our business loan calculator, we’ve got your back. We help small and growing businesses like yours get access to fast, flexible, and reliable funding with less paperwork and more confidence.

Start planning today, and let TallyCapital guide your way to smart business funding.

Running a small business in India comes with many challenges, and managing money is one of the biggest among them. Whether you want to grow your enterprise, buy new equipment, or cover daily expenses, having enough capital is essential. If you don’t have sufficient funds, exploring alternative financing options—like business loans—can be a practical solution. Access to timely funding can make all the difference between seizing an opportunity and missing out. 

What are secured and unsecured business loans?

When you apply for a business loan, lenders usually offer you two main types of credit: secured and unsecured loans. Each type comes with its own benefits and risks. Understanding the differences can help you choose the right option for your business needs.

Secured loans

In a secured loan, you pledge the lender something valuable as collateral, like your property, machinery, or other assets. If you’re unable to repay the loan, the creditor has the right to seize that asset to recover the money. Here’s what you need to know before applying for this loan:

• You can get larger loan amounts
• Interest rates are usually lower
• You get more time to repay
• There’s a risk of losing the asset if you can’t repay on time

Unsecured loans

In an unsecured business loan, you don’t need to offer any asset as security. The lender gives you the loan based on your credit score, business income, and financial history. Know these things before you apply for this loan type:

• Easier and faster to get, since there’s no collateral check
• You won’t lose any assets if you can’t repay (though your credit score will suffer)
• Loan amounts may be smaller
• Interest rates are a bit higher since the lender is taking more risk

Types of business loans

MSMEs often require financial support to manage operations, expand services, or invest in infrastructure. Understanding the different types of business loans available is essential to choosing the right financing solution. Below is an overview of the most common loan options tailored for MSMEs in India.

Term loans

A term loan is one of the most common types of business financing. You borrow a fixed amount from the lender and repay it in monthly instalments over a specific time. This loan is suitable for long-term investments. Depending on the lender, it can be either secured or unsecured. The interest rate and loan amount depend on your business’s financial health.

• Best For: Business expansion, buying property or equipment 
• Eligibility: Based on business stability and repayment capacity
• Collateral: Optional (can be secured or unsecured)

Working capital loan

Running a business means you constantly need funds for day-to-day operations, whether it’s for paying employee salaries, restocking inventory, or handling rent and utility bills. That’s where a working capital loan helps. This type of credit provides short-term support to keep your business running smoothly, especially during low-revenue periods.

• Best for: Short-term money needs
• Eligibility: Suitable for businesses with regular income and expenses
• Collateral: Not required

Invoice financing 

Sometimes, you provide services or goods to your customers, but payments get delayed. Instead of waiting, you can use those unpaid invoices to get a loan. In invoice financing, the lender gives you a percentage of the invoice amount upfront. Once the customer pays, you can return the loan with a small fee. This improves cash flow and helps avoid delays in your operations.

• Best for: Businesses with long payment cycles
• Eligibility: Requires unpaid invoices from reliable customers
• Collateral: Not required – invoices act as security

Business line of credit

This works like an overdraft facility. The lender gives you access to a credit limit, and you can borrow any amount within that as needed. You only pay interest on the amount you use, not the entire limit.

• Best for: Managing unexpected expenses or seasonal needs
• Eligibility: Businesses with consistent financial records
• Collateral: Not required

Equipment financing 

If your business depends on machines, tools, or vehicles, you may need funds to buy or upgrade them. Equipment financing is a loan specifically for this purpose. The machinery you purchase acts as collateral for the loan. Since the asset secures the credit, lenders often offer favourable terms like lower interest rates and longer repayment periods.

• Best for: Manufacturing or production-based businesses
• Eligibility: Businesses with a need for new machinery
• Collateral: Required

Business credit cards

A business credit card works just like a personal credit card but is used only for business-related expenses. It helps you make quick payments for small purchases, travel, utility bills, and more. It also helps track expenses separately from personal spending, which is useful for accounting and tax purposes. 

• Best for: Managing daily or monthly business spending
• Eligibility: Based on the business owner’s credit score
• Collateral: Not required

How to choose the right loan?

With so many loan options available, it can be difficult to decide which one is the best fit for your business. However, asking yourself a few simple questions can help you make the right choice.

Here’s what to consider before applying for a business loan:

1. Why do you need the loan?

Start by identifying the purpose. Is it for daily operations, business expansion, buying equipment, or managing cash flow gaps? The reason will help you choose between short-term or long-term loans.

2. Do you have assets to offer as security?

If you own property, machinery, or other assets, you can consider a secured loan with better terms. If not, opt for an unsecured loan that doesn’t require collateral.

3. How quickly do you need the funds?

Some types of unsecured business loans like working capital loans or merchant cash advances are usually processed faster. If you need money urgently, these may be better options.

4. Can your business afford the repayments?

Check your income, cash flow, and monthly expenses. Make sure you can handle the loan EMI comfortably without affecting your operations.

5. What’s your credit score and business history?

Lenders often look at your credit history and financial records. A strong credit score increases your chances of approval and may help you get better interest rates.

Wrapping Up

Finding the right business loan can feel challenging, but once you understand your needs and the options available, the decision becomes much easier. Whether you’re looking for a quick unsecured business loan or a long-term secured loan, it’s important to choose a financing option that supports your business goals. At TallyCapital, we’re here to make that decision simpler for you. We partner with trusted financial institutions to offer MSMEs customised loan solutions that are fast, flexible, and reliable.

Ready to take the next step? Let TallyCapital help you grow your business today!

If you’re a small business owner in India, chances are you’ve either taken a business loan or are thinking about securing one. Loans are a common way for MSMEs (Micro, Small, and Medium Enterprises) to manage cash flow, grow their operations, or invest in new opportunities. However, there’s one aspect of a loan that can be confusing to many, i.e., interest rate.

For many Indian MSMEs, understanding how business loan interest rates work remains a challenge. Here, we’ll simplify the concept, helping business owners make smarter borrowing decisions.

Why do interest rates matter to small businesses?

The interest rate on your business loan is the amount the lender charges you on the borrowed fund. It directly impacts the cost of borrowing. A higher interest rate means paying more over time, which can affect the cash flow, profitability, and growth plans of the company.

 Here’s why interest rates are important for small businesses:

•  Loan affordability
  The interest rate on a business loan directly affects the monthly EMI.  A higher rate increases repayment amounts, making loans more expensive. Lower rates improve affordability and reduce the repayment burden.
• Cost of capital
  Higher interest rates increase the total cost of financing operations or expansion of the business. So, controlling the interest expense is crucial for maintaining profitability.
• Profit margins
  When interest rate rises, a larger portion of the business earnings goes toward repayments. This can reduce profit margins, especially for small or low-margin businesses. Lower interest helps preserve more revenue for growth or savings.
• Decision-making
  Knowing the interest rates of different lenders allows businesses to compare loan options effectively. It helps identify the most cost-efficient financing solutions. Smart comparisons can lead to significant savings over time.
• Financial planning
  Predictable interest rates support consistent and reliable budgeting. They help businesses forecast future expenses and plan long-term goals. Fixed rates, in particular, offer financial stability during the loan term.

In short, understanding interest rates helps small businesses make smarter borrowing decisions and maintain financial stability.

Types of business loan interest rates

In India, business loan interest rates come in two types: fixed and floating. Let’s check these in detail.

Fixed interest rate

It is a suitable option for borrowers who prefer predictability and stability in their loan repayments. With this type of rate, the interest remains unchanged throughout the loan tenure, ensuring that the EMI (equated monthly instalment) stays consistent. This makes it easier to plan and manage your finances, as there are no surprises due to market fluctuations. However, the drawback is that you won’t benefit if market interest rates decrease during the loan period.

Floating interest rate

It is ideal for small businesses that are comfortable with some variability and want the opportunity to benefit from declining market rates. This type of rate is linked to market conditions, particularly the Reserve Bank of India’s (RBI) repo rate, and can fluctuate over the loan period. As a result, the EMI may increase or decrease depending on how the market moves. While this flexibility can help you save money when interest rates drop, it also comes with a degree of risk, as payments may rise if rates go up.

Factors affecting business loan interest rates?

Lenders don’t offer the same interest rate to every business. Here are some elements that influence the interest percentage you’ll be charged:

Credit score

Lenders look at both your personal and business credit scores. A CIBIL score above 750 is usually considered good and can help you get a lower interest rate.

Business age and revenue

Older businesses with stable incomes are seen as less risky by lenders. If your business has been profitable for a few years, you’re more likely to get better rates.

Type of loan

Loans backed by security (like property) often come with lower interest rates. These are called secured loans. Unsecured loans, which don’t need collateral, usually have higher rates.

Lender type

Different lenders offer different rates. For example:

• Public sector banks may offer lower rates but take longer to process.
• Private banks may be faster but slightly more expensive.
• NBFCs and fintech lenders often have easier paperwork and fast processes but may charge a bit more.

RBI monetary policy

When the RBI changes the repo rate, loan interest rates across the country also change. If the repo rate goes down, new loans often become cheaper.

How to get a better interest rate?

Here are some simple tips to improve your chances of getting a lower business loan rate:

Improve your credit score

Always pay your bills and EMIs on time. Check your credit report regularly for any mistakes. A strong credit history builds trust with lenders.

Maintain clean financial records

Keep your business accounts, GST filings, and ITRs updated. Lenders often ask for 6-12 months of bank statements and profit and loss reports.

Compare offers

Don’t accept the first loan offer you get. Compare at least 2-3 lenders before making a decision.

Negotiate

Yes, you can negotiate! If you have multiple offers, you can ask your preferred lender to match or lower the rate.

Offer collateral (if possible)

If your business can offer collateral like property, machinery, or stock, you may be able to get a secured loan with a lower interest rate.

Common myths about business loan interest rates

Let’s clear up a few common misconceptions surrounding business loan interest rates:

Myth 1: A lower interest rate means the cheapest loan

Not always. Some lenders may charge high processing fees, prepayment charges, or other hidden costs. 

Myth 2: Only banks give low-interest loans

NBFCs and fintechs can offer competitive rates, especially for businesses with strong digital footprints.

Myth 3: Personal credit score doesn’t matter

For most small businesses, especially sole proprietorships, the owner’s personal credit history is very important.

Myth 4: EMIs stay the same for every loan

EMIs can change in floating rate loans or if there are special terms in your loan agreement.

Real-life example: Ramesh’s stationery business

Let’s imagine that Ramesh runs a stationery wholesale business in Pune. He wants a ₹5 lakh loan to buy stock before the new school season. He compares offers from a public bank (11% fixed rate), a private bank (13% floating rate), and a fintech lender (14.5% fixed rate).

Since Ramesh has a good credit score, updated GST filings, and a three-year-old business with steady profits, he qualifies for all three loans. After reviewing the total cost of each loan, including processing fees and flexibility, he chooses the private bank’s floating rate loan. By understanding the interest rate and making a smart choice, Ramesh saved nearly ₹12,000 over the loan tenure.

Closing thoughts

Understanding interest rates on business loans is the first step to making better borrowing decisions. However, only knowing about it is not enough, you need a trusted lending partner who supports your business goals with the right financing solutions.

TallyCapital provides seamless and reliable financial solutions to Indian MSMEs by partnering with trusted lenders, simplifying access to capital, and empowering businesses to overcome challenges and grow with confidence. Whether you need a business loan or financial guidance, we’re here to support you at every step of your journey.

Seasonal businesses in India often experience high demand during specific times of the year and low or no consumer preference during others. They typically align their sales with holidays, weather changes, school terms, or tourism patterns. These seasonal fluctuations can affect the business’s cash flow, stock, staff needs, and daily operations. While you can’t control the seasons, you can prepare for them. With the right planning and access to a working capital loan, your business can stay strong through both busy and slow periods.

In this article, you’ll learn how to manage your business during seasonal fluctuations.

Challenges faced by seasonal businesses 

Running a seasonal business often comes with ups and downs. While the busy season can bring in lots of customers and profits, the off-season can be tough to get through. Here are some common challenges that seasonal businesses in India often face:

Cash flow stress

When sales go up during festive or peak seasons, everything feels great — but once the season ends, the sales often drop too. Despite this, your expenses like rent, salaries, electricity bills, and loan repayments continue every month. The uneven flow of money can make it difficult to manage your business smoothly throughout the year.

Stock management issues

Before a busy season, you need to stock enough goods to meet customer demand. However, if you buy too little, you might run out of products and lose sales. On the other hand, if you overstock, you may be left with unsold inventory that ties up your capital.  A clothing store, for example, may get lots of orders during the wedding season. If they don’t plan properly, they could either run out of popular items or end up with excess stock.

Hiring workers

When things get busy, you may need more staff to help with the extra work. However, hiring full-time workers for just a few months can be expensive. It can also be difficult to find temporary staff who are skilled and available when you need them. A travel agency, for example, may need extra staff during summer holidays, but hiring them full-time isn’t cost-effective.

Planning for low-demand periods

During the off-season, customer demand can be very low. This means fewer sales, but your business still needs to run. It can be tough to stay motivated and manage expenses when you’re not making enough money to cover the operations. You need to plan so that you don’t feel the pressure when the customers aren’t coming in.

Missing out on opportunities 

Sometimes, a big order or new business may come up unexpectedly. However, if you don’t have enough money to buy materials or hire workers, you may have to turn down the opportunity. This can stop your business from growing.

Why does financing matter during fluctuations?

Seasonal fluctuations bring both challenges and opportunities. Here’s why having the right financing can make all the difference:

Prepare for high demand in advance

A business working capital loan can help you stock up on inventory, hire temporary workers, or run marketing campaigns before the busy season begins. With this support, you’ll be ready to handle bulk orders.

Manage expenses during slow periods

Even in the off-season, your business still has regular expenses like rent, salaries, and bills. A working capital loan can help you cover these costs, ensuring your enterprise doesn’t get affected by periods of dull sales.

Grab growth opportunities

At times, unexpected large orders or new contracts can come your way. With quick access to funds through a business loan, you can accept new business opportunities without worrying about cash flow.

Strengthen supplier relationships

Paying your suppliers on time builds trust and helps you negotiate better deals in the future. A business loan ensures you have the funds to keep those relationships strong, even during the off-season.

Financing options for seasonal businesses 

Seasonal businesses often need extra funds to deal with the busy and slow periods. Different financing options can help you manage cash flow and keep your company running smoothly. To choose the right financing, consider factors like your repayment ability and how quickly you need funds. Here are a few business financing options to consider:

Working capital loan

A working capital loan is a short-term loan that helps you cover your everyday business expenses. It’s especially useful during slower months when your sales drop but you still need to pay rent, salaries, or buy stock. This type of loan ensures you don’t run out of money while you wait for the busy season to come.

Business line of credit

A business line of credit works like a credit card for your business. You’re given a credit limit, and you can borrow as much as you need, up to that specific amount. The best part is that you only need to pay interest on the money you borrow. It’s a flexible option that lets you get funds when your business needs it the most.

Invoice financing

If your customers take time to pay you, invoice financing can help. With this option, you can get an advance on the money your clients owe you. This helps you obtain funds right away, instead of waiting weeks or months to receive the payments from the buyers. It’s a great way to cover costs when your business is waiting on customer payments.

Merchant cash advance

If your company receives most of its payments via credit or debit cards, a merchant cash advance (MCA) could be a suitable financing option. It involves receiving a lump sum upfront from alternative lenders or fintech firms, which is then repaid through a percentage of your daily card sales. This makes it particularly useful for businesses with fluctuating income.

Equipment loans

Sometimes, you might need to buy new machinery for your business, especially before a busy season. Equipment loans help you buy the supplies you need without paying for them all at once. You can pay back the loan over time, so it doesn’t stress your finances.

How TallyCapital can help you with business financing?

At TallyCapital, we understand that seasonal businesses need the right financial support to handle both busy and slow periods. We connect you with trusted financial partners to obtain business working capital loans according to your needs. Whether you’re preparing for a festival rush or handling a long off-season, we can help you find the right loan to keep your business running smoothly.

Bottom line

Managing seasonal fluctuations is essential for the success of any business. With the right planning and business loan, you can stay prepared for both busy and slow periods. This way your business remains stable and continues to grow throughout the year.