No business can grow without adequate capital. As a business thrives, so do its costs, and oftentimes it happens that the funds the company has are not enough for the business to go forward. This is where the need for loans arises.

Business loans provide companies with essential capital, allowing them to expand further and help better achieve their business goals. But getting a business loan is not easy, especially for small businesses.

Continue reading to know how you can get a business loan to take your venture to new heights.

Before applying for a business loan, it is important to know your requirements. Without this, you will not be able to use the loan efficiently. When it comes to small business, it is all about how you use each rupee of your capital. If you ignore this aspect, you might spend the entire loan amount, and still find yourself at the same stage you were before.

When identifying your business needs, you should understand the exact purpose of the loan. If the loan amount is going to be used for expansion purposes, such as opening a new factory or a branch, or if it will be used to purchase new equipment. Other than this, you should also know how much loan amount you require and for how long. Keep in mind that the longer the tenure, the higher the interest you pay.

And finally, the most important thing, you should know your repayment capacity. As a small business owner, you should avoid the debt trap at all costs. If the loan you take is beyond what you can repay, the interest rate will pile up and instead of helping your business, the loan will destroy it. Therefore, never take a loan which you won’t be able to repay.

Once you have a clear idea of why you want a business loan, the next step is to check your eligibility.

The eligibility of a borrower is largely determined based on the following factors:

1. Age: You must be at least 21 years of age at the time of borrowing and not more than 65 at the time of maturity.

2. Business Vintage: At Appreciate loans, you get .

3. Turnover: Most banks refrain from lending to businesses with less than a turnover of ₹40 lakhs.

4. Profitability: Lenders usually prefer giving loans to businesses that have been profitable for at least 2 years.

5. CIBIL Score:While the requirements for the CIBIL score might vary, a score of 700 is considered an optimal score for applying for a business loan.

Interest rates are the most important component of a loan. A higher interest rate may even mean that you end up paying more than the amount of the loan you took. Which is why it is ideal to compare interest rates of various financial institutions before applying for the loan.

But beware of shady lending platforms which are not registered with the RBI. The platforms offer loans at an attractive rate, and then proceed to harass customers based on terms and conditions which are not mentioned at the time of approving the loan.

The Indian government has been actively supporting the growth of small businesses. As part of this, the government has come out with various schemes to help fund the small businesses. The interesting part about these schemes is that many of them don’t require any collateral for borrowing money.

One such example is the Pradhan Mantri MUDRA Yojana, which provides financing of up to ₹20 lakhs without any collateral. Most of these government schemes don’t require CIBIL scores either.

Some of the Government schemes small business owners can consider are mentioned below:

1. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)

2. SIDBI Make In India Loan For Enterprises (SMILE)

3. Credit Guarantee Scheme for Subordinate Debt (CGSSD)

There is nothing wrong in borrowing funds to expand your business, given that you follow the requirements and take all the necessary steps to avoid falling into the debt trap. Securing a loan without a planned objective could prove to be detrimental to your business.

Comparing interest rates of different lending institutions, checking the latest government schemes can help acquire credit without any unknown risks.