Questions you should ask before you go for a business loan in Delhi

Taking a business loan is necessary these days if you want to expand your business further. Paying for your business from your own pocket just becomes impossible after your business has reached a certain level of success. For that purpose, there are plenty of banks and NBFCs (Non-Banking Financial Companies) that provide business loan in Delhi and other metro cities of the country. Let us discuss some of the most frequently asked questions about business loans.

Q: Why is it not possible to avail a loan for 100 percent of my receivables?
A: When the lending institutions give you the loan, they have to consider the worst case scenarios. So if businesses fall into a crisis, especially concerning operating losses, the receivables end up disappearing as the business owners are struggle to keep the business afloat. To save your business, you end burning up your liquid assets and thus, the lenders have a difficult time collecting the receivables.

Q: Is it a better idea to approach small banks rather than large banks?
A: In simple terms, yes. Although the operating procedure isn’t much different, going for smaller banks is a better option. The reason is that you don’t just need to maintain good relationship with the bank but the banker as well. In a bigger bank, the person who is handling your loan would eventually move up and your loan would be handed over to a new person. In a small bank however, the positions are rather limited and thus, stable – which is what you need.

Q: Is finding the lowest interest rate the most important thing?
A: Not at all. Whether you’re taking a loan against property or a loan without collateral, you must know that interest rate is not the important thing. It doesn’t do you any good if you get the amount at a lower interest but it’s not the amount you needed – this is especially true for a growing business. When you are taking a loan for a business, chances are that the bank would want you to conduct all your finance related activities there as well. So you need to look at the whole cost of the relationship and not just the interest rate.

Then there are some banks that offer lower interest rate but they’ll find ways to cover that deduction by levying extra charges like not allowing you withdraw a certain sum of money from the loan that you’ve been given, or levying heavy foreclosure charges etc. So you need to take everything in consideration. And again, for a growing business, the most important thing is to know that the bank they’re going to be dealing with will lend them money, even if their business is expecting a temporary downturn.