Most Common Difficulties Faced by Borrowers While Applying for Small Business Loans in India


Indian Business organisations can make use of Small Business Loans to support themselves with cash needs. Several banking institutions in India provide specialised Business Loans with low interest-rates. Peerless Finance’s Small Business Loans’ Interest Rates start at 18% P.A.

Still, there are often a number of difficulties in getting a Business Loan in India. Above all, there is an absence of transparency, limited access to cash, as well as most notably, the required collateral for credit security.


Most Common Difficulties Faced By Borrowers


1. Lengthy Application Processes


Even if you possess several forms of documentation, Indian Business Loans do seem to be notorious for taking a longer time to process.

Lenders recheck customers’ information till they are completely pleased. To secure a repayment assurance from the client’s end, a personal finance company will collect

hundreds of signatures on several types of papers.

Moreover, they contact customers a hundred times to validate every detail, such as their company information, the date individuals started their company, and the amount of money they are making from their business. 


2. Excessively Focusing on Credit History


Someone’s credit score in addition to their credit history are impacted by that one failed check from a year ago, a missed credit card transaction, an existing auto loan, and so on. SME/Business Loans up to Rs.50 Lakhs from Peerless Finance remain unsecured. Borrowers can apply with low CIBIL score, on the other hand, loan sanction will depend on the capability of repayment.

Then again, borrowers also possess an option to provide Peerless Finance with a guarantor (Partners/ Directors). Indian banks classically place too much importance on any company’s credit history whenever considering any loan, requiring them to thoroughly inspect even the smallest Details. 

After weeks of waiting, a simple hindrance in your banking activities might result in loan refusal! Furthermore, being denied a loan due to low earnings put someone in a difficult situation. Banks will decline your Secured Business Loan outright rather than postponing it thanks to poor credit history.


3. Access to Funds Less Than Needed


There is always a chance that a borrower may perhaps fail. In order to reduce risk, banks seek out to start small. They provide a considerably smaller amount than is necessary in order to assess how well business operators pay their loans back. 

They hold off on providing a slightly larger sum as compared to the amount the borrowers are wishing for. Depending on one’s payment background, the loan’s journey continues.


4. The Burden Of Collateral


A highly valued asset or similar thing must be pledged as collateral in order to get a loan. When loan is repaid, that collateral may be taken back; whereas, if the borrower defaults on the loan, the lending institution keeps the collateral! 

Many businessmen lack significant collateral to provide to lenders as security. Obtaining any Business Loan becomes more a significant task! 

If you default on your Small Business Loan, your highest risk would be that you will lose your asset. It’s particularly dangerous if you choose a very valued item, like your house to back the loan.


5. Need For Maintaining Cash Flow


No matter how much money someone’s business makes, borrowers are required to possess enough funds to run their venture for a couple of seasons. Pre-planning would be crucial for that!

A few of the typical reasons of cash flow issues remain outside the control of an organization. Proper cash flow demonstrates that borrower’s company generates substantial revenue to pay off any existing debt she/he may have in addition to the expense of any fresh loan.


The Conclusion


Due to limited technology, getting a Small Business Loan in India generally takes a longer time. Online lending services are one example of an unstructured financial institution attempting to close the gap. 

Online lending services embrace cutting-edge technology to speed up the procedure as well as encompass specified requirements for all organisations. Channels for online Business Loans are constantly expanding.

Peerless Finance offers Business Loans so that anyone may begin their journey smoothly. With us, companies may now achieve their company improvement goals, whether they consist of increasing operations, keeping inventories, or call for working cash on flexible terms.

Shambhu Nath Pandey