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How To Get A Business Loan For A Franchise Business?

mahindra-finance-author

by Mahindra Finance

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April 17, 2024

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5 mins read

Starting a franchise business can be an exciting opportunity, but securing financing is a crucial consideration. Many aspiring entrepreneurs wonder if getting a business loan specifically tailored for a franchise is possible. In this blog post, we will explore the feasibility of applying for a business loan online for a franchise and discuss the factors lenders consider in such cases.

Understanding franchise business financing

Franchise businesses are often considered less risky by lenders compared to independent startups. This is because franchises come with a proven track record, an established customer base, and operational guidelines provided by the franchisor. These factors make franchise businesses more appealing to lenders.

Many traditional banks have special loan programs tailored for franchise businesses. Depending on the specific franchise and the lender's requirements, these loans may have varying terms and conditions. They generally require a solid business plan, a good credit history, and collateral. In some cases, franchisors also provide financing options or partner with lenders to help prospective franchisees secure funding.

Factors that affect business loan

Several factors determine a business loan's approval and terms. The applicant's creditworthiness, including personal and business credit history, significantly influences lenders' decisions. The business plan's strength and viability, the amount of collateral available, and the overall economic conditions impact the loan approval process. Additionally, the specific industry, the borrower's financial stability, and the purpose of the loan contribute to the comprehensive evaluation that lenders undertake when considering business loan applications.

Simplifying a business loan online process

Applying for a business loan online has become increasingly convenient and streamlined in recent years. It allows you to save time and effort by completing the application process from the comfort of your own home or office.

Here is a step-by-step guide to applying for a business loan online

Step 1: Research lenders

Start by researching different lenders who offer business loans for franchises. Look for lenders with experience working with franchise businesses and offering favourable terms.

Step 2: Gather your documents

Before starting the application process, gather all the documents lenders typically require, such as your personal and business financial statements, tax returns, bank statements, and any other relevant documents.

Step 3: Fill out the application form

Visit the lender's website and navigate to their online application form. Fill out all required fields accurately and honestly. Double-check all information before submitting the form to ensure accuracy.

Step 4: Calculate your EMI

To determine whether you can comfortably afford the loan repayment amount, utilize an online business loan EMI calculator. Enter details such as loan amount, interest rate, and tenure to calculate your Equated Monthly Installment (EMI). This will give you an idea of the monthly payment you can expect to make.

Step 5: Submit your application

Once you have completed the application form and calculated your EMI, submit your application online. You may be required to upload scanned copies of your supporting documents.

After submitting your application, the lender will review it and assess its feasibility based on various factors such as creditworthiness, franchise selection, and business plan. They may also contact you for additional information if needed. It is important to communicate regularly with the lender during this process.

Calculating Your Business Loan EMIs

Calculating your Equated Monthly Installments (EMIs) helps you plan your finances better and manage monthly loan payments without stress. Online business loan EMI calculators simplify this process by providing quick results based on key inputs such as loan amount, interest rate, and tenure.

Let's understand how a business loan EMI calculator works with an example:

Suppose you are applying for a business loan of ₹10 lakhs with an interest rate of 10% per annum for a tenure of 5 years:

  • Loan Amount: ₹10,00,000
  • Interest Rate: 10%
  • Tenure: 5 years

Using a business loan EMI calculator, the estimated EMI for this scenario would be approximately ₹21,266. This gives you a clear understanding of the monthly payment you need to make towards your loan.

Benefits of Applying for a Business Loan Online

Applying for a business loan online offers several advantages over traditional methods:

  • Convenience: The online application process eliminates the need for physical visits to banks or financial institutions. You can complete everything from filling out forms to document submission online, saving time and effort.
  • Quick turnaround time: Online loan applications are processed faster than traditional methods. With streamlined processes and digital platforms, lenders can provide quicker approvals, allowing you to access funds when needed.
  • Expert guidance: Some lenders offer personalized assistance through dedicated relationship managers who understand your business needs. They can guide you through the loan application process, provide financial advice, and help you make informed decisions for your franchise business.

Conclusion

Applying for a business loan online has simplified the process for aspiring entrepreneurs, providing both convenience and flexibility. The online application streamlines the traditionally cumbersome procedures, making access to financing more efficient and accessible. By utilising an EMI calculator and comparing business loan interest rates, you can make informed decisions about your franchise financing.

Mahindra Finance provides hassle-free business loan solutions with competitive interest rates, quick approvals, and personalised guidance from dedicated relationship managers.

Frequently Asked Questions

Q1: What documents are required for a business loan application?

A1: The documents typically required for a business loan application include proof of identity, address proof, financial statements (personal and business), tax returns, bank statements, and any other relevant documents requested by the lender.

Q2: How does a business loan calculator work?

A2: A business loan calculator helps calculate the Equated Monthly Installment (EMI) based on key inputs such as loan amount, interest rate, and tenure. It simplifies the process of determining the monthly payment you need to make towards your loan.

Q3: What is the current MSME business loan interest rate?

A3: The MSME business loan interest rate can vary depending on factors such as the lender, loan amount, and tenure. Researching different lenders and comparing their interest rates is advisable to find the most favourable option for your business.

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