Seeing a shop grow and expand its customer base is a matter of great pride for shop owners. After successfully launching a retail business and reaching a place where the business is stable and profitable, most shopkeepers ask themselves “What’s next?” or “How can they take it to the next level”. Shop owners need to consider several factors while managing their retail business, including maintaining inventory, managing the workforce, investing in new products, tracking volumes, and building relationships with customers.
When the time comes to expand, some feasible options include opening a new outlet, offering a new product line, marketing, going online, etc. Since these projects require substantial capital, most shop owners apply for a business loan to get the needed funding. Let’s find out why a shop loan can be the key to your business growth in 2023.
What is a Shop Loan?
Shop loans are specially designed small business loans for retail shopkeepers who need funding for various purposes. Retail shop owners can avail of these loans and boost their cash flow. These are collateral-free loans that aspiring borrowers can obtain with minimal documentation. Since most retail store owners might be unable to procure sufficient documents for the loan application, shop loans make funds easily available to them with simple eligibility criteria and a few documentation requirements.
Top Reasons Why Shopkeepers Take Shop Loans
Some common purposes for taking an instant business loan for a shop include the following:
- Store furnishing
- Expanding the existing store
- Advertising and marketing the shop
- Purchase and setup of POS machines or another necessary equipment
- Building an e-commerce website
- Launching schemes and offers for the customers
- Meeting seasonal demand
- Hiring new staff
- Restocking inventory
- Opening a new store
Features and Benefits of Unsecured Shop Loans
Here are a few features and benefits that make shop loans an ideal funding option:
- Low-Interest Rates: Retail shop loans at competitive interest rates help store owners bring their growth ideas to life.
- Nominal Processing Fees: Unlike other loan types, an instant business loan has minimal processing fees, saving a considerable amount on the loan cost.
- No Collateral Requirement: Since smaller shopkeepers have limited assets and properties, they opt for unsecured business loans that are available without any collateral, guarantor, or security.
- Quick and Hassle-Free Disbursal: Retail business owners often require urgent funding for various business-related purposes. A business loan for shopkeepers provides them with the necessary funding, minimal documentation requirements, and a streamlined approval process. In other words, aspiring borrowers can access the necessary funds quickly using its straightforward and convenient process.
- Repayment Flexibility: Borrowers can not only use the loan amount for any purpose they want, but they can also repay it according to their convenience. Most loan providers offer flexible repayment terms, allowing borrowers to compare EMIs for different loan tenures and opt for one according to their affordability.
Advantages of a Shop Loan for Shopkeepers
Shopkeepers can apply for business loans of up to Rs 50 Lakh without pledging any collateral. The following are the main benefits of obtaining a Shop Loan:
- Aids Business Growth
When shopkeepers take a Small business loan, they can use it for business growth purposes, including expansion, retail improvement, equipment purchase, store renovation, resource management, etc. Such crucial upgrades mean a lot for small businesses in the long term. They can also hire a workforce or take care of marketing and digital advertising. With such developments, chances of business growth are increased.
- Inculcates Financial Discipline
While taking a Shop Loan, borrowers can choose a convenient repayment tenure with reasonable EMIs. While selecting a repayment tenure, they must draw up a budget and calculate monthly EMIs to ensure they go right with their finances. By doing that, they can develop financial stability and systematically repay the loan.
- Keeps Assets Intact
Most retail shop owners have limited assets they cannot put at risk for taking an instant business loan. Since Shop Loans are unsecured, lending institutions determine the loan eligibility of the borrowers based on their finances, turnover, and credit history. Those with a decent financial condition can easily qualify for a shop loan without pledging any property as collateral. That means they can keep their assets intact while funding their business growth with a shop loan.
- Saves Money on Interest Rates
Many loan companies provide business loans to shopkeepers at competitive interest rates. Such affordable interest rates give them an opportunity to support exponential growth without paying a considerable amount of interest. After all, the loan cost for financing shop expansion should not hit hard on the owner’s wallet.
- Maintains Flexibility
Borrowers can utilise their business loan for many purposes, including marketing, manufacturing, purchasing, supplying, transportation, construction, etc. They can use the loan amount without worrying about end-use limitations. Loan providers do not restrict borrowers from using funds to any avenue.
- Funds Establishment
A business loan for shopkeepers provides them with the much-required foundation for their business growth. Loan borrowers can repay their loan in the predetermined repayment tenure without compromising on their store or missing any instalment. An added advantage is that, if they are regular with payments, their credit score will get a boost, making it easier for them to get funds in the future and get quick approvals.
- Simple Eligibility
Shop Loans from reputable lending institutions hold simple eligibility criteria. A few conditions that the borrower must align with include the following:
- Age limit: 21 years to 65 years
- Minimum turnover: INR 1 Crore
- Age of business: At least 3 years old
- Credit score: 700 or above
- Business CMR (CIBIL MSME Rank): not more than 6
• Completely filled out application form
• Recent passport size photograph
• Identity proof like an Aadhaar card, PAN card, or government ID for government employees
• Address proof like an Aadhaar card, passport, voter ID, or driving license
• Six months account statement and copy of the most recent ITR
• Audited Balance Sheet and Profit & Loss account for last two years
• Proof of business continuity for last three years
• Proof of shop ownership – Property documents in the name of the applicant of the applicant’s spouse/parent
Taking a Shop Loan can make a big difference to the owner’s dreams. With sufficient financial support watching their back, they can take up their expansion prospects. The main advantage of why shopkeepers apply for business loans is that such loans can initiate their business growth without exhausting their hard-earned savings or pledging their assets as collateral.