When securing a business loan, a person needs to get in touch with the bank agents and understand the criteria for accessing the fund, which helps the owner propel the business.
There are several hurdles for a business owner when it comes to availing a business loan, and a company needs to meet the loan criteria to get certified by the banks. Here, an individual can consult with a business loan agent, and they can guide the customers about the loan approval process.
In this blog, we will look into some of the core measures that business houses can take to ensure that the loan amount gets sanctioned and that the entrepreneur can effectively increase the business’s core operation.
- Crisis in Collateral
The first problem that most small and medium-sized businesses face is the lack of collateral which can back the loan amount. In the initial days of the business, a company requires funds for capital expenditure, but the banks seek property that will be kept to them in exchange.
From this conflict of interest, a company needs to face a slow disbursal of the loan and needs to go through an ample lot of paperwork, which is a major barrier to the medium and small-sized business houses in a country.
Possible Solution: A business can go for a variety of government schemes and can aim to get credit under that account. If the loan is not secured by the bank, in the initial days, it’s better to get a loan from the NBFCs, which have a less stringent process, and an individual can get the business loan without mortgaging some assets as collateral.
- Higher Interest Rates for the Loan
Another problem for a small and medium-sized business is that a company can get a loan sanctioned to their name, but the interest rate is absurd and is very high. In that case, getting the loan amount can impact the sustainability of the business. The company needs to start making interest payments, and if the interest percentage is very high, then it eats into the working capital of the business.
Possible Solution: An MSME business can look for subsidized credit sources and can check the government schemes and needs to find whether they are getting a lower borrowing cost. From the traditional institute, a small business owner should do research about the banking institutes, and that helps a person to make an informed decision.
- Less Access to the Formal Capital
An MSME doesn’t have a large balance sheet, so at the end of the financial year, they need some access to the formal capital to make payments. However, with the lack of a proper banking system, these customers are not catered to. In many cases, businesses need to stay out of operation to pay out all the bills that damage the productivity of the business.
Possible Solution: MSMEs can now leverage different types of NBFC products and government schemes like Pradhan Mantri Mudra Yojana (PMMY), which aims to relieve small business owners and give them access to their working capital.
- Hard and Complex Application Procedures
Getting loans involves several complex procedures, which challenge the business and create hindrances to getting the loan faster. One needs to meet the eligibility and stringent processes of the bank, which makes loan availability rare in the Tier-3 parts of the country.
Possible Solution: Here comes the solution of the digital lending platforms, which are swift in disbursing the loan amount and are one of a kind in providing quick capital to the customers. There are a lot of fintech companies that are partnering with traditional banks and helping a customer to get the loan.
Within that app, there are loan agent app where people can have direct conversations with a representative of the bank and can easily get the documents and avail of the loan with a variable method of payment.
Loan disbursal was tough earlier through traditional banks, and in today’s time, the process is getting faster, and it is now easier for MSME owners to get access to loans. Here are the certain steps that one can take to overcome the loan hindrance.
