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Published on November 16, 2019
Overview:
India has the third-largest startup base in the world behind the USA and the UK as per NASSCOM studies in 2016. It signifies that the country is rife with business ideas and the driving force in the SME sector. A new entrepreneur is often faced with hurdles for raising funds which every business need. Recognising the importance of startup business, the Government has also initiated schemes to nurture such small enterprises through their flagship MUDRA. On the other hand, banks and NBFCs, including the Fintech companies, have come forward with tailored products for small startup business loan products with attractive features to woo the startup entrepreneurs.
How to get ready for a small startup business loan?
Getting a small business loan for startup is easier said than done. There are multiple sources for seeking finance for your project, but the prerequisite is the meticulous groundwork for approaching the right lender for the right loan. Some of the stages for your readiness can be enumerated thus:
Startup Business Loan Sources:
You are already familiar that there are multiple ways of looking for funds to nurse your business. It goes without saying that funds are the lifeline of any business enterprise. Looking for funds for the business is not only critical for the health of the business, but it is also essential for it to grow and achieve its potential. Let us list them out.
Given the circumstances in India, the most popular small business loans are sought from banks and NBFC or of late from Fintech. Even the Government initiatives like Mudra are catered to by the banks.
Benefits of Startup Business Loan:
No enterprise can do without a business loan in their operating cycle. How prudently you use it is reflected in the outcome. However, there are several reasons for its popularity as a great option for startups.
Eligibility of Startup Business Loan:
The norms will vary from lender to lender. It is best to find a median and get prepared to comply after confirmation from the lender. It is also important to remember that banks and Government rules are more stringent, making Fintech attractive for startup business loans.
Documents required for Startup Business Loan:
It is one of the crucial aspects of seeking a loan. Traditional lenders have an elaborate document regime as compared to the Fintech who make do with bare essential documents. Let us check out the minimum which is only indicative and may require additional documents from the lender during application processing.
How to apply for a Startup Business Loan:
You are already familiar with the fact that banks have stringent rules for business loans. On the other hand, Fintech is a good option as the process is fully digitalised. The steps are simpler and well defined in a minimalist pattern.
Let us check it out:
Fees and Charges for Startup Business Loan:
For any borrower, the cost of loaned capital is the outcome of the rate of interest and other applicable fees. Let us check them out at a Fintech:
Rate of Interest | Up to 27% per annum |
Quantum of Loan | Rs.50K to as much as Rs.2C |
Tenure | Maximum of 36 months |
Processing Fee | 1% to 2% of the loan amount applied at the time of disbursal |
Foreclosure Fee | Nil |
Security | No collateral is required. |
Bottom Line:
The success of the loan application is higher at the Fintech for their easy terms and great customisation. A startup business being generally nascent when the business loan is sought, a Fintech is the best bet in India. They also promise fast processing in a matter of hours, unlike the banks that may take days.