How does a business loan work?

A business loan is an amount that you borrow from the lender so that you can start a business or so that you can grow an existing one. One such loan aggregators include Buddy Loan, that aid your credit score and add more benefits.  

Before you apply for an online business loan, you need to evaluate how much you need and what are the rates you are being charged.

How to Apply for Small business Loan

When you apply for a business online, it is simple, hustle free, and quick. You no longer need to visit the physical office to be able to make an application. You will, however, need to check through the providers of the loan and evaluate which provider fits your bill. Once you are comfortable, then you need to ensure that you have the right documentation to apply for the unsecured business loan. If the documentation is right, then waiting for your sanction letter.

When applying for your instant business loan online, you need to make sure your documentation is right, and your credit score is safe. This way, your business loan application will pass by the verification stage quickly, and the money will be credited into your account.

SME business loans may be categorized as short term loans or long term loans. The loans may also be divided into secured loans or unsecured loans. 

Professional Loans

Professional loans are extended to self-employed professionals such as chartered accountants, doctors, and lawyers, based on their credit history. It also varies from one bank to another as to how much loan amount can be extended to the professional and his/her trade relationship with the bank. 

Trade Loans

Type of businesses that can apply for Trade Loans are:

• Sole Proprietorships
• Partnerships
• Private Limited Companies

Trade Loans mainly comprises three types:

Overdraft

Working capital

Term loan

Overdraft

These loans are based on some securities or collateral, especially in terms of bank deposits. This loan can be utilized by the customer as long as the interest is paid on time. The bank uses the client’s relationship to analyze how much they should get.

Working Capital Loan

This loan has lower interest and is given to the business to keep them operating. It works like an instant business loan.

Term Loan

Term loans are the standard type of small business loan that is for businesses purposes. When you apply for the business loan, the entire amount in a term loan is disbursed, and EMI is based on a specified pre-defined tenure.

How can I repay my business loan?

Repaying my Business Loan

As lenient as business loans maybe, a bounced check or a defaulted payment can lead to a bad credit score, which in turn might lead to negative reviews while applying for future loans. Look no further than Buddy Loan, as it offers the best interest rates on business loans. 

However, if planned immaculately, just as is the case with any loan, your credibility improves by leaps and bounds, allowing for easy and trustworthy transactions in the future.

But how? 

Let us find out.

How can I repay my business loan?

There are multiple ways you can pay off your business loans. Here are some tips for planning your resources accordingly. Albeit every loan comes with its own “expiration date” and repayment terms, you need to understand the strings attached to make sure your business complies to the norms set by the lender/investor

1.   Understand the terms and conditions.

Before signing a contract, a borrower must understand the agreement. Many business owners, due to lack of options, jump right in and sign contracts out of desperation, which should never be encouraged. You are under no obligation to accept a contract even if it detrimental to your business.

2.   Keep the investors in the loop when dark times loom ahead.

If you can forecast dark times and know you will not be able to make your payments on time for a certain period, informing your investors about this sickness is of the essence.

3.   Pay on time

As a rule of thumb, make sure you have sufficient funds to make your payments. Most term loans come with monthly payment options, so make sure you have set aside funds dedicated to paying off your loan.

4.   Keep an eye on your cash flow and credit scores

If you have an inconsistent cash flow, you will have a hard time paying off your debts on time, ultimately leading to a bad credit score. Make sure you have a steady cash flow to cover financial flaws.

5.   Foreclosing a business loan

There always comes a time when you believe you are capable enough of paying off your entire amount in one go, which I called foreclosure. Make sure you plan your foreclosure so as not to lose money. Loans usually work off your interest in the first year; hence, foreclosing in the first year is not a good idea as you will be paying the interest as well as the principal amount.

Buddy Loan helps you keep an eye out for all such issues. With Buddy Loan, find the business loan that complies with your requirements and matches your ability.

Happy financing! 

What Are The Benefits of a Business Loan

Benefits of Business Loan

Why business loans make sense?

Business, as we know it today, has evolved from just being a corner shop run by a family to sophisticated pillars of society run by a body of investors and owners sharing risks and profits, contributing to the world economy, and in return, garnering trust and credibility. Business loans are best offered at Buddy Loan, know more benefits about your financing.

 And just like any sector, to grow and expand, a business needs a business module, and a business module can only be set in motion with financing. This is where business loans come in handy.

What are business loans, and how do they help?

A business loan is a type of loan optimized and intended for business plans. And as it is with all kinds of loans, a business loan lender creates debt, which is then repaid by the borrower with added interest agreed upon by both parties before the loan is sanctioned. Be it to buy machinery, or to expand your business; business loans cater to the needs of a businessman.

There are many types of business loans available depending on a borrower’s requirements and eligibility, some of which are listed below.

1. Bank loans.
2. Mezzanine Loans or Mezzanine financing.
3. Asset-based loan Invoice based loans.
4. Small business financing (Also called startup financing)

Benefits of business loans.

Unlike “bad credit” loans like personal loans, the pros of applying for a business loan outweigh the cons. Let us have a look at some benefits a business loan applicant is entitled to.

1. Convenient and accessible: Applying for a business loan today is no mountain climb is you have a good credit history. There are hundreds of options available in the markets today.
2. Multiple options: We now know a business loan application is not limited by the choices available to him/her. The borrower can opt for the option best suited for his/her business needs.
3. Flexible repayment options: Business loans are designed in a way so as not to hamper the current business module of the borrower. 
4. Hassle-free business loan application process: These loans are so easily disbursed, a borrower need not run around in circles and can apply for a business loan online unlike the old traditional ways.
5. Instant approval: Business loans are usually disbursed within 24 hours, depending on the amount the borrower has applied for. Even so, a borrower does not have to wait for days to get his/her business loan approved.
6. No collateral required: This, of course, depends on the type of loan a borrower has applied for. Unlike mezzanine loans or asset-based financing, most business loans do not require collateral or mortgage. 

And to top it off, business loans are easily accessible through Buddy Loan. With low-interest rates and flexible payment options, Buddy Loan makes sure your business grows to great heights.

Documentation:

Buddy Loan has a varied range of investors, depending on the borrower’s requirements. Although documentation may vary from lender to lender, it spans in and around the following list.

1. Identity proof (Aadhar Card, Driving License/PAN card/Passport/Voter ID)
2. Address proof (Electricity bill/Telephone bill/Passport/Trade license/Lease agreement/Sales Tax certificate)
3. Income proof (Bank statements ranging from 3 months to two years, depending on the lender’s requirements)
4. Financial documents (ITR for the past two years along with balance sheets, Income and profit & loss a/c)
5. Business Ownership proof (For existing business owners only. This is not applicable for startup financing seekers)

If you are looking for a business loan, look no further into Buddy Loan.

Happy financing!

How does prepaying help in repaying my business loan?

Business Loan Online

Business loan or Buddy Loan is the lifeline of the small and medium business owners in India as it gives them the capacity to revamp, reconstruct, and expand their business. Many banks and financiers in the market provide easy business loans with less documentation with a fixed tenure to the borrowers. Once the loan is availed, the borrower has to understand the repayment mechanism to the financer. Equated monthly instalments or EMIs' is a term known to everyone and is the way of repayment to the lender. 

Business loan keeps going for a fixed number of years. In any case, if a borrower chooses to reimburse the credit before the tenure end, the bank can't gain the premium that was fixed at the hour of advance processing. Thus, the loan specialists charge a prepayment expense on the prepayment.

Even with the lender asking for a prepayment charge, it is monetarily beneficial for the borrower to make a prepayment in parts or in full in the early years of the loan tenure. 

Prepayment charges

The prepayment charges in SME advances differ from lender to lender. On the off chance that you are pre-covering the advance also called advance fore-closure, the prepayment expense will be around 4% of the outstanding principal amount, and the part of the principal paid back to the lender in the last 12 months.

In the event of part prepayment, a few banks don't charge any expense on if you are pre-settling up to 25% of the outstanding principal amount. Goods and services tax is also levied on the prepayment charges as applicable.

How is prepayment beneficial?

It is advisable to check with your bank or financer at the start of the loan about the prepayment charges and other terms and conditions involved. The preclosure and prepayment details are also mentioned in the proposal form shared by the bank with the borrower. One should read it in detail and check with the lender if there is an ambiguous term involved. Moreover, it is an excellent choice to prepay your loan as it removes the burden one carries during the tenure of the loan.

Prepayment can help you save a considerable amount of money if you do it the right way. As mentioned above, try to prepay the loan as early in the loan tenure as possible to save most on business loan rates.

Does borrowing a business loan affect my credit score?

Business Loan Online

Running a business is not an easy task as it involves many parameters that a business person has to take into consideration while making decisions. Getting a Buddy Loan for the business can sound intimidating as it introduces you to some business terminologies that are important from the point of finances. Availing a loan for your business can have an impact on your credit rating as well. The following points discuss the credit ratings in detail.

Understanding Business Credit Score

BSC or Business credit score is a number that demonstrates whether an organization is decent to get a credit or become a business client. Credit scoring firms check the company’s credit history, which includes obligations and repayment to lenders and suppliers, tax filing issues, and bankruptcies. The score is generated after checking the history as well as years of operation of the company, type of business involved in, repayment issues, if any, and the business plan of the borrower. If all the parameters are right, your business credit score will be good, and it will be easy to get a loan from the financer. 

Personal Credit Score

 A personal credit score is a statistical number that showcases the creditworthiness and the history of credits of the borrower. It involves checking the number accounts in the name of the borrower, total debt on the borrower, and the repayment history. The credit score can range from 300 to 850 and is calculated on the abovesaid details. It shows the repayment ability of the person promptly. 

Depending upon the type of business, your personal and business credit scores affect each other. If you have a sole proprietorship business, then your credit score is your business score. In such a case, if you default on the payments, then it will affect your credit score. 

In a partnership business, the personal credit score of the partners and the firm are essential. Any default on the firm’s part will reflect on the personal credit scores of the partners. In limited liability partnerships, the partners are liable only partially for the debt. Still, the credit company requires the personal credit score of the partners. In a limited company, there is no debt burden on the shareholders, and the debt is in the name of the organization. Yet, the personal credit history of the directors is involved. It is, therefore, critical for a small business owner to maintain a good personal credit score and business credit score.