The e-commerce sector in India is rapidly booming. With hundreds of thousands of shoppers going online every day, the e-commerce industry is already on the path to tasting massive success. Along with that, the grand success of festive sales from eCommerce brands like Amazon and Flipkart is an obvious sign of e-commerce growth in India. The financial institutes in India have recognized the massive potential of e-commerce brands and have started offering them loans to facilitate their growth and increase their market presence. Today, many banks offer special e-commerce business loans to help them grow. These loans have proven to be more than a blessing for small brands competing against bigger brands in the cutthroat competition.
Apart from the banks, many venture capital firms are also actively investing in homegrown e-commerce brands mainly because of their higher market potential. The banks that offer business loans to eCommerce brands are also very flexible regarding the interest rates and the repayment schedule. It would be the right choice for business owners to get a business loan to sustain their operations and expand their businesses. If you are an e-commerce startup founder, here’s how you can get a loan for your eCommerce business in India.
Prominent features of eCommerce loans in India
After realizing the rising dominance of e-commerce brands in the startup sectors, many banks have developed personalized business loans for e-commerce businesses in India. These loan packages are carefully curated to cater to the needs of startup founders who drive the growth of their early-age online shopping brand. These loans help them fuel their working capital to sustain their operations and keep growing. If you are wondering whether a particular loan is suitable for your business, here are some prominent features of e-commerce loans that you must know.
- Lower interest loan from 1.5% onwards
- Higher loan value from ₹1 lac to ₹1 crore
- Flexible repayment schedule ranging from monthly to bimonthly
- Availability of unsecured loans with no collateral
- Longer loan tenure of 90 to 270 days
These are some of the distinct features that distinguish eCommerce loans from other loans. Keep an eye on these features when applying for eCommerce business loans in India.
Eligibility criteria to get an eCommerce business loan
A few years back, obtaining a loan for a startup from a bank or NBFC was very challenging as they had strict eligibility criteria. But with time, these banks and NBFCs have relaxed their criteria. If you have not had a steady revenue stream, you can still apply for the business loan and get it approved. Here are some common eligibility criteria for getting a business loan for an e-commerce brand.:
- The business must have a specific monthly revenue.
- Companies must have a substantial presence on bigger brands like Amazon, Flipkart, Alibaba, etc.
- Good credit history can be beneficial, but it is not mandatory.
- Your business should be registered and in operation for a minimum of 6 months.
If you fulfill these criteria, you can easily get a loan for your company.
How to choose the best business loan for your e-commerce business?
It’s essential to get the right business loan aligned with your business vision and goals. A lousy business loan would create more problems, such as difficulty in payback or higher interest rates. The following are some crucial factors to consider when applying for e-commerce business loans.:
1. Quick loan disbursement
As a startup founder, you already juggle a lot of responsibilities. You are about constantly looking after various core operations and cannot afford to spend your time on other things. Therefore, you must look for a loan that can be disbursed in less time. Loan procedures are notorious for extending to several months. But you cannot afford to lose that much time when your business needs you the most. Always confirm an approximate disbursement date when you apply for the loan.
2. Lower interest rates
Every loan comes with an interest rate, and you have to pay the interest along with the principal amount. In many loan cases, the higher interest rates drain your finances and can lead to more loans. But if you carefully choose a business loan with a lower interest rate, you can easily pay it back without difficulty. On top of that, eCommerce business loans often have lesser interest rates, so you can easily avoid higher interest rates.
3. Collateral as a security
Though unsecured loans have become more mainstream than ever, you should confirm whether your loan application demands security as collateral. Many founders who cannot offer collateral prefer unsecured loans that do not require collateral.
E-commerce businesses are witnessing their golden years as more and more people prefer shopping online than in stores. This increasing number of potential buyers has only added to the increased popularity of e-commerce brands. Naturally, many banks have started offering e-commerce business loans to such brands. If you are looking for the same, make sure you choose the right bank that offers lower interest rates, quick disbursement, no collateral, and a flexible repayment schedule.
Though business loans are easy to obtain today, many founders still prefer getting an investment from a VC or investor. Founders who are not willing to dilute their initial equity prefer revenue-based financing. Regarding revenue-based funding, the founders don’t have to share their equity with the investor. They can pay a monthly payout to the investor from their gross revenue. This way, they can retain their original equity and pay off the investor.