Five Habits of Highly Effective Business Loan Borrowers Effective business borrowers achieve success by finding the right overlap between business needs, loan products and the following compliance and here is what you need to know

By Lucas Bianchi

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

graphicstock

From machinery to manpower, running a business entails consistent funding. Business Loans are one of the key pillars of these funds. But the process and ability to secure a business loan stems from a sound financial acumen. A highly effective business loan borrower is not only creditworthy but also understands the business' credit requirements in-depth. Here are five habits that we find are most common to savvy and successful SME borrowers:

Determining the Business' Credit Needs

From cash credit to a term loan, every loan product comes with different interest rates, disbursal structure, repayment timelines and collateral requirements. Due diligence to understand one's business need for credit and quantum of potential benefit derived from the credit is a must to engage with a lender profitably. Effective borrowers are also aware of key factors like pre-existing business debt, business credit score and business revenue trends that play an important role in the loan approval process.

Maintaining a Strong Credit History

Effective borrowers exercise utmost discipline in loan repayment. Credit is the lifeblood of any business and provides a great degree of financial flexibility to the businessman for growth. The effective borrower will always avail the line of credit and strictly follow the repayment schedule to not only generate higher returns but also create a sound financial track record i.e. credit history. Having a good credit history in business as well as in personal life enables better deals in future loan endeavours.

Being Aware of the Fine Print

Business loans are complex products with a comprehensive set of terms and conditions that may become relevant only after some time. These terms should be conducive to one's current and future business needs. From prepayment facility to foreclosure charges, being thoroughly aware of how well one's line of credit is aligned with one's business goals is a recipe of success. Having a CFO with good financial know-how will make the process smoother but in the absence of a Financial officer, consulting loan agents or even resourcing dedicated online applications will help borrowers become better informed.

Getting Offers From Multiple Lenders

Simply put, "Shop Around'. Reaching out to multiple lenders to avail multiple business loan offers might be a tedious process but an effective business loan borrower knows that in the world of credit one-size-fits-all doesn't exist. Every lender will have a different outlook and lending policy towards different businesses and segments, so it is best to generate multiple offers and choose the best fit. As there is no dearth of loan venders available in the market, multiple offers also provide the chance for a borrower to compare rates and use the research as leverage to negotiating good deals.

Engaging a Professional Loan Agent

An effective business borrower understands that engaging and dealing with multiple potential lenders can eat up a lot of time and resources. Hence, efficient ones hire a subject matter specialist to help them avail multiple offers tailor-made to their business needs. These specialists may range from professional loan advisors to one's Chartered Accountant or Financial Advisor. Availing professional help to augment the rationale of one's business borrowing decisions delivers the best results.

To conclude, effective business borrowers achieve success by finding the right overlap between business needs, loan products and the following compliance. They are shrewd and work closely with professional intermediaries to get the best deal, conduct extensive market research, go through the fine print with a sharp eye and have all the necessary paperwork. Effective borrowers also follow stringent discipline in maintaining and updating their business accounts. Once the loan is availed, they are diligent about paying their loans on time so that the doors of any lender are open once they have any future credit requirements.

Lucas Bianchi

CFA & Co-Founder Namaste Credit

Passionate about research, analytics, innovation, and the financial markets, Lucas Bianchi is now focused on building Namaste Credit an exciting new financial technology platform for SMEs loan financing across the emerging markets.

Starting in India, Namaste Credit has been developed as a technology-driven marketplace focused on streamlining and democratizing the credit distribution process. As a co-founder, Bianchi is excited to be working with a great team at Namaste Credit to help connect interested lenders to a wide range of business owners in a simple, effective and efficient manner.

Related Topics

Leadership

International Security Firm Welcomes Female India Native to an Essential Leadership Position

Yasmin Brar has been appointed as the Operations Strategy Director, a role that underscores the company's commitment to innovation, expansion, and strategic management

News and Trends

5 Things Uber CEO Khosrowshahi Did During His India Visit

Dara Khosrowshahi has managed the company's business in more than 70 countries around the world since 2017, and is on his third visit to India.

News and Trends

SIDBI, Bihar Start-up Fund Trust Ink Pact For Enhancing Startup Ecosystem in Bihar

The fund shall not invest directly into start- up companies, instead it shall contribute to the corpus of SEBI registered Alternative Investment Funds, which in turn shall invest in startups.

Business Ideas

55 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

Airbnb Renter Discovers Hidden Door, Says Police Confirm There's a Secret Unit Upstairs With 'Surveillance': 'A Terrifying Experience'

One bride-to-be was in for a not-so-welcome surprise when she discovered a secret door in her Airbnb rental.

Business News

Here Are 3 Strategies Startup Founders Can Use to Approach High-Impact Disputes

The $7 billion "buy now, pay later" startup Klarna recently faced a public board spat. Here are three strategies to approach conflict within a business.