Every organisation requires a sufficient amount of funds for survival and expansion of operations in the long run. Financial needs may range from funding the purchase of new equipment or machinery to meeting overhead and operating expenses such as rent and salary. 

Business owners are now resorting to unsecured financing options, such as a small business loan in India to raise funds and meet various expenses of an organisation. However, before opting for such financial assistance, it’s essential that one weighs the advantages and disadvantages associated with it.   

Pros of a small business loan in India

The following are the advantages of availing a business loan in India:


  • Lenders have no influence over business decisions


Unlike venture capitalists, financial institutions do not interfere in the financial operations of a business. Business owners who raise funds from investors have to work alongside them unless they are a silent partner. Whereas, even though a financial institution would review the business model before sanctioning a loan, they will have no influence over how an organisation manages its funds. 


  • A reasonable rate of interest


Compared to other funding options such as credit cards, business loans come with lower interest rates. Lending institutions compete amongst themselves to acquire customers. Therefore, they try to offer the best possible interest rates that are in line with what other lenders are offering. 

Furthermore, financial institutions such as Bajaj Finserv offer up to Rs.45 lakh as business credit. It allows business owners to fund all enterprise-related expenses without facing immense strain. One can fill gaps in the cash flow and ensure smooth running of day-to-day operations. 

Moreover, the NBFC also offers lucrative pre-approved offers which make the loan application process hassle-free.  These offers are available on various financial products, such as credit cards, personal loans and business loans. Check your pre-approved offer instantly by entering your name and mobile number. 


  • Financial institutions are not entitled to profits


In most cases, entrepreneurs opt for financial assistance in the form of business loans to expand their operations to maximise profits.  Raising funds from investors will force business owners to part with a portion of their profits in return. Nevertheless, such is not the case if an individual avails a small business loan in India to maximise his/her business’s returns. 

The cons of availing a business loan

The following are the disadvantages associated with business loans:


  • Stringent eligibility criteria and rigorous documentation 


The policies and guidelines of financial institutions often turn out to be unfavourable for businesses, especially startups.  Not all organisations can meet the eligibility criteria set by business loan providers. Moreover, one has to submit the required business loan documents to get the loan approved. Hence, it’s imperative to know beforehand what information you need to apply for a business loan. 

  • Insufficient amount of funds

One of the other main disadvantages of availing a business loan is that financial institutions may not sanction adequate funds after evaluating the documents. It’s common for business loan providers to approve only 70-80% of the amount that an entrepreneur seeks. Moreover, the organisation’s turnover and profits might not be enough to get approval on a higher loan amount. 

Opting for a small business loan in India can be an ideal solution to meet the financial requirements. However, business owners need to assess their repayment capacity and ensure that they know the right time to get a business loan.