Are you planning to expand and upgrade your business or professional practice that you have successfully nurtured in your region? Like your venture, there may be many micro, small or medium enterprises (MSMEs) that have become locally popular brands and have a regular clientele. All such promising enterprises deserve to grow and earn higher returns.
Several financial institutions such as banks, non-banking finance companies (NBFCs) and new-age financial technology (FinTech) firms are willing to lend to ventures that have good prospects for growth.
To apply for a business loan from a FinTech company, the business owner can use a completely digitalised procedure. Although these firms have their offices across both major cities and small towns, there is really no need to visit the physical premises. This is because everything from the submission of your application to the receipt of funds happens online.
If you wish to leverage such flexible MSME loan process for materialising your business development plan, it will be a short and smooth journey to the funds. You simply need to ensure that you are well prepared and follow the right steps.
Here is how to proceed:
- Create a plan stating a convincing reason for the loan
By deciding to get adequate financial support for your business, you may have a specific purpose that you utilise it for. It could be the purchase of property for a new branch or warehouse, the purchase of new equipment or aesthetic furnishings for the office, or supplementing your inventory when the market price of such supplies is low, or any other reason that will help in the upgrading of your business.
To convince the lender of your genuine intentions for using the funds, it is wise to document the purpose of the loan. In your business plan, you can explain the current standing of your venture and the way you wish to improve it.
Customer-facing businesses frequently borrow to make their premises more attractive for extra footfalls and to add new services/facilities such as home delivery of food from a restaurant, new courts for sports in a school or added public utilities at a petrol pump station.
- Research for your lender
The next step in the MSME loan process is to choose the best lending source for your business. If you are looking for a quick and unsecured loan that does not require you to pledge collateral to the lending institution, a FinTech company will again be your best option.
There has been a recent increase in the number of such digitally operating peer-to-peer (P2P) lenders in India. To narrow down your choices, you need to make active comparisons. Talk to friends and peers in your respective industry for recommendations. Check the offerings of FinTech lenders online.
You can start by looking into the diversity of their credit products. Do they provide both term loans and merchant advances? Do they have any special loans for e-commerce businesses? What is special about their loans for independent professionals in the medical, educational, retail, legal and other specialised sectors?
Make sure that the lending institution has a safe website encrypted with HTTPS protection. You will be entering a lot of personal and financial details on this online portal, so it must be safe for such activities.
Do not hesitate to speak to the customer service teams of your chosen company and find out the best product they can offer for your business.
- Gather the necessary documents
Your business loan application will have to be substantiated by some essential documents. It is good to get them scanned and have the soft copies in clean PDF formats ready before you start filing the application.
Unlike banks, FinTech companies do not have heavy paperwork requirements. Their purpose is to evaluate the creditworthiness of the borrower on the basis of general statements reflecting the history and financial stability of the business.
The ‘know your customer’ (KYC) documents of your business can be a copy of its registration certificate, the license copy (for specific businesses such as petrol pump), and the original business plan describing the staff structure and revenue-generating activities. The other necessary paperwork usually includes the recent bank account statement for the previous year, the record of digital payment settlements (for a merchant cash advance), the latest IT returns processing document and other documents – such as balance sheet and profit & loss account – describing the financial health of your business.
- Apply online
The MSME loan process in a FinTech company is simple and digitalised. It takes less than 15 minutes to fill the application form and to upload the soft copies of the necessary documents.
You simply need to enter your personal details, bank account details such as account number and IFSC code for fund transfer and a summarised mention of some information given in your documents.
For your own records, you may take a screenshot of the application to capture all information before you send it online on the lender’s website. As these FinTech lenders have encrypted websites, rest assured that your information will be safe.
- Receive funds and begin using them
Just like the online application filing process, its review also does not take long. In most cases, you will get a decision on your business loan application on the same day and possibly, within a few minutes. If this is an approval, the funds are disbursed to the borrower’s bank account in the next 2-3 days.
The repayment procedure of loans issued by a FinTech company is not defined purely in terms of EMIs. While most borrowers do find it convenient to pay off in instalments, clearing the outstanding debt through a single payment is also an option. Unlike banks and traditional NBFCs, FinTechs do not charge prepayment penalties from their borrowers.
A business loan bridges the gap between your plan for improving a venture and the stage when you actually realise it. With the financial support of a FinTech company, any MSME can take concrete steps to improve its standing in the market. Make the first move towards your company’s growth by formulating a plan for the rightful upgrade.