How to get a business loan- All you need to know!

A tiny expanding firm frequently needs funds to meet immediate demands. Not everyone is qualified to pass a bank credit check: you must have a high turnover of customers, a strong credit history, and a large number of supporting papers. A microfinance organization may be able to provide you with an emergency loan for a little sum based on business rules.

In order to obtain a loan from an MFI, you will just need to provide a short bundle of supporting documentation. And it happens swiftly - generally within a week, the funds are made available. There is, of course, a price to pay for speed. The interest rate on such a loan may be greater than the interest rate on a bank loan - ranging from 20 to 70 percent, depending on the amount, length, and kind of loan taken out.

How can I acquire a loan at a lower interest rate?

It may come as a surprise, but entrepreneurs may really acquire a loan at a lower interest rate. There are two methods to go about it:

As part of the government's assistance program: Small and medium-sized companies (SMBs) are supported through a state-sponsored initiative. Special non-profit microfinance institutions (MFIs) exist in the areas as part of this initiative, and they provide loans to small and medium-sized businesses at a lower interest rate.

A Guarantee: If you give assurances that you will return the debt, a microfinance institution (MFI) may be able to lower the interest rate on your loan. A guarantee from another person or company might be used in this situation as well. Alternatively, you can pledge anything such as products, equipment, stocks, automobiles, real estate, or even your own personal property.

When applying for loans at preferential rates for businesses, the process is similar to that of getting loans for entrepreneurs at standard interest rates: you submit paperwork, pass an inspection, and then receive money.

What documents are needed?

Obtaining funds from an MFI is less difficult than obtaining funds from a bank, but you must still gather the necessary documentation. As a general guideline, you should plan ahead by doing the following:

  • A passport (for an individual entrepreneur or the founder of a corporation);
  • If you are an individual entrepreneur, your TIN (tax identification number) is your legal entity or individual identification number.
  • A sheet of paper to be entered into the EGRIP, or the Unified State Register of Legal Entities;
  • Tax return.

The total number of papers required will vary depending on the criteria of a certain MFI as well as the kind of loan. If you want a significant sum of money for a long period of time, for example, if you wish to borrow a million rubles for a year, you may be required to provide extra documentation, such as a business plan, before your application may be approved.

How to get a microloan?

Step 1. Choose an MFI

Specify the legal name of the organization and check to see if it is included in your country’s registry of legal names. Unfortunately, fraudsters frequently pose as microfinance institutions, necessitating the need for verification.

Step 2: Examine the loan's terms and conditions

Compare and contrast the situations in various MFIs. Read the contracts thoroughly, and make sure to check to see if there are any further payments required.

Examine your capabilities: determine whether or not you will be able to return the loan with interest on time. Specify the fines and penalties that will be assessed for late payments.

Step 3: Evaluate the level of service provided

Remember to phone the MFI and ask how fast you will be connected to a professional in the event that guidance is required. On the Internet, read the testimonials of previous borrowers of this MFI.

Step 4. Apply

This can be completed in person at the MFI's office or online at the MFI's website. You will need to fill out a unique form in which you will need to indicate:

  • If you are a solo entrepreneur, please include the complete name of your organization.
  • status (IP, OOO, or AO);
  • the amount you wish to be compensated;
  • loan repayment period.

It is possible that you will be required to submit further documentation. Sometimes MFI staff will want to visit your office or manufacturing facility to ensure that you are in fact operating a legitimate company operation. It is in your best interests to take their views into consideration in order for the application to be granted.

Step 5: Submit all of the necessary paperwork and sign the contract!

If the judgment is favorable, you will be presented with the contract, either in person or by email. Make certain that the conditions have not changed and that they are favorable to you once more. Sign the contract on your behalf, and then pass it to the financial institution. Once this has been completed, the funds will be deposited into your bank account or corporate card.

The Bottom Line

Business loans are the most crucial way to grow small businesses and SMEs! Without them, there is a minor possibility that your business might actually grow. This is because to run and hence grow a business, you require adequate funds to manage and improve various sections of the business.

These avenues can be advertising, digital marketing, social media marketing, SEO, and many more. Hence, now that you know about business loans and how to take one, I hope that it will grow your business to multiple folds!


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