The Business Loan is about working with the cash flow. Either you can utilize a business loan to start a new business or to expand the existing business. The interest rate, amount and loan tenure for a small business loan is generally kept in favor of businesses. Generally, for a small business loan the interest rate is in the middle of 4% to 15%. If the interest rates are too high then there is no point of availing such loans, since a small business organization cannot pay such a large sum.
Business loan is a type of financing to meet the monetary requirements of a business venture. It is the best option when you are in dire monetary needs. These loans are availed with an intent to reimburse. It is offered for a period of 6 to 36 months to solve short-term financial issues.
Purpose of Business loan
The financial sector is rapidly evolving. Previously banks were the only options for borrowers. Today with the arrival of P2P lending, NBFCs, crowd funding, angel investors and micro finance investors, the lending industry have evolved forever.
You might be familiar with loan application process of banks, but P2P lending has opened a new avenue to avail personal loans to Small Business Loans at fair interest rates by means of hassle free online application process. Now entrepreneur and industrialist have multiple options to choose from.
Banks are one of the first institutions that comes in mind to avail a business funding. But the tough regulations and lengthy application process of banks makes them less approachable for a startup and small to mid-size organizations. They need to first verify all your credentials and follow a well-defined process for loan approval.
Banks offer two types of business loans
Peer to peer lending companies have become quite popular these days. These lending companies offers uncollateralized business loans that doesn’t require any security deposit. It is easy to avail a small business loan; the application process is online, easy, quick and requires minimum documentation. Once you match their eligibility criterion, you may get the loan amount disbursed in a short span of time. These online marketplaces have made the whole process of lending hassle-free.
P2P loans Vs Bank Loans
Banks follow a standardized or uniform procedure whether you apply for a business or personal loan approval. But, P2P lending companies have a customized and well-tailored approach for each type of borrowing applications; based on your unique profile.
Business loan eligibility:
Banks lay a significant emphasis on the credit score i.e. your CIBIL ratings. While Peer to Peer lenders go by an advanced approach towards lending a small business loan. Your business loan eligibility is focused on your overall loan repayment ability. But for banks you are you are no more than a credit number.
Speedy application process:
P2P lending companies have developed a cutting-edge technology towards loan application approval. Normally, any banks will take minimum 3 weeks of time before approving the loan, and if you are in quick need of cash then banks are not your peers. With faster loan application process, peer to peer lending companies are better approachable.
Which one is cheaper?
Bank loans are collateralized while P2P loans are uncollateralized, i.e. the loans are not secured on the risk of any assets. Along with collateral, banks also charge high-interest rates taking into account the cost of writing off bad loans.
Peer-to-Peer Lending is different. Since the middle men has been removed from the overall process. Thus, loan approval process becomes less expensive. Online P2P virtual marketplace streamlines traditional protocol, so decisions come faster. Additionally, P2P lending companies applies cutting edge technologies and latest algorithms with more contemporary ways of evaluating an applicant's ability to pay back. Thus, there is less chance of delinquent loans.