Securing credit is often an ideal solution for any company burdened with pressing financial issues. It offers not only much-needed support to overcome operating cash crunch but also opens up vistas for new growth possibilities. An unsecured loan from reputable and reliable institutions may precisely be what your business needs to manage the current situation to your advantage.
With minimal paperwork and simple application process, you enjoy complete transparency, quick access to funds and, most importantly, fast availability of unsecured business loans to address your immediate requirements.
However, the road to secure a Business Loan is bumpy and filled with numerous challenges. The common hurdles faced along the way include limited access to funds, lack of transparency, and the requirement to furnish the collateral or to arrange for a guarantor.
Let’s take a closer look at some of the obstacles that you are likely to face while trying to avail SME loan in India and the methods to overcome them.
- Complex and Lengthy procedure: You might want to expand your business and need immediate financial support to take things forward; however, the course to secure a loan for small businesses in India can be painstakingly lengthy, complicated and slow.
In order to apply for a small business loan, you need to complete and share the relevant documentation with the concerned lenders. Your application goes through several checkpoints at the lender’s end till they are satisfied to proceed further— the presence of any loophole could prolong the process. You might also have to sign several documents to assure your commitment towards the timely repayment in line with the contract terms and conditions.
It could take ages to obtain final approval or rejection from the corporate loan sanction department. In the meanwhile, you’ll need to keep your plans on hold till the time you hear back from the concerned authorities — This could hit you adversely in terms of business growth plans and revenues.
- Collateral requirements: While the Government of India together with RBI and SIDBI is committed towards the growth and expansion of the SME sector and has rolled out several measures to drive the development and expansion; however, business owners still face difficulties while seeking a working capital loan. It is mainly so because most of the financial institutions are asking corporate loan applicants to pledge collateral. Given the company size and experience, it is often tricky for an entrepreneur to provide a guarantee, thereby losing an opportunity to acquire the loan needed to grow their business and revenues.
Under such circumstances, an unsecured business loan could come to the rescue. Since these online corporate loans are without obligation, they come under the classification of unsecured credits.
- Manual processing: The lack of technology is another major reason why securing a loan for retailers takes an unusually long time to materialize in India. Several online lending sites award a loan based on your credit history and score. It is a simple process with all the required details available over the internet. As the procedure gets simplified, loan approval and disbursal gets quicker, saving both the receiver and the granter of unnecessary hassle.
Unfortunately, most if not all of the lending institutions here are stuck with the older and outdated ways of checking and verifying the credit history of the applicant. They call you personally to verify information, then visit your facility to understand your business operations, select office photos, and walk you through a bundle of paperwork. No wonder, securing a business loan could take ages to get sanctioned
- Extra Focus on credit history: Instances such as bounced EMIs, late fee submission on your credit card transactions, ongoing house or auto loan etc., emphasize great control and influence over your credit score and credit history. When it comes to loans, Indian banks usually place too much importance on business credit history, and they review and investigate every minor detail diligently.
Even after working so hard and waiting in anticipation for months together, a single negative statement reflecting in your bank accounts could result in a loan denial. And that is not all! Even having low earnings in comparison to your loan sanctioning requirements could straightaway render your application to be rejected. Instead of giving the option of increased ROI or decreasing the amount of credit that can be offered, the bank outrightly denies you the SME loan.
- Additional stress: Though nothing is more exciting than running your enterprise, it also brings along its own set of pressures and challenges. The last thing an entrepreneur wants when applying for SME Loan is unwarranted stress and fear. You might be looking for cash to acquire the latest technology or contemplating an upgrade— Capital crunch at this stage could be heart-breaking. Therefore, knowing of an uncomplicated process from trustworthy and legitimate lenders that offer fast loan application processing is critical.
In order to keep the business functioning and generating revenues, each enterprise needs funds to purchase, substitute, renovate or upgrade its resources and infrastructure in some way or the other. In some cases, an urgent requirement such as a critical repair or replacement in the facility could seriously hit the budget planning. Instead of waiting endlessly for a bank’s approval, you can take help of other financial institutions providing loan for small business— it can take care of your immediate requirements. Additionally, informal money lenders also assure that you receive the funds in the bare minimum timeline without hampering the optimum running capacity of your facility.
In short, securing a working capital loan for your enterprise is a big challenge. However, these loopholes are being slowly plugged in by the entry of informal financial institutions and online lending portals. Not only they have a predefined criterion on financing, but they also believe in endorsing the latest technology to fasten up the lending operations. The financial institutions are still in the growing phase, but, it won’t be long before they completely take over the capital funding market in India.