A small Business Loan is often taken by Small and Medium-Sized Enterprises (SMEs) to expand their businesses. These loans have become the most important aspect of all types of businesses and are heavily sought after. Due to high demand, availing of a loan can be a challenging task as a vast pool of SMEs is striving to fund their business propositions. Besides competition, procuring a loan also requires your Business Loan application to be approved by the lender.
Luckily, there are a few smart ways to ensure that your loan application is approved. Knowing these handy tips will increase your chances of getting a Business Loan. Let’s take a look:
– Choose the Right Loan Type
There are various types of Business Loans available to meet different kinds of business requirements. For instance, SME Loans, Working Capital Loans, etc. Hence, choosing the right loan type as per your business requirement increases the chances of Business Loan application approval.
– Identify the Right Business Loan Lender
Once you have a clear idea about the loan type that best suits your business, decide on the lender. There are multiple banks and NBFCs (Non-Banking Financial Companies) in India that offer Business Loans. Make sure to conduct thorough research on all the available lending institutions before you finalize one. A careful study of the lender’s eligibility criteria, loan benefits, terms & conditions is of utmost importance. You can also compare different lenders online to find a loan at an attractive Business Loan interest rate in India.
– Maintain a Good Personal & Business Credit Score
To improve the chances of Business Loan application approval, a good credit score is required. It shows the borrower’s creditworthiness and intent to repay the loan on time. Also, having a good credit score may help you avail of a loan at an attractive Business Loan interest rate in India.
– Make a Proper Business Plan
The lenders will lend you the money based on the business plan you are going to present as well as the projection of the success rate. Hence, it is important to chalk out a strong business plan before you approach a lender for a loan. Create a detailed plan that outlines your business’s goals, strategies, and financial projections. Prepare an inventory of all items that are involved in your business. This will give the impression that you have a strong business plan, and that you will use the loan for the right purpose.
– Ensure Positive Cash Flows
Business cash flow is one of the primary indicators of any company’s financial well-being. Maintaining a healthy cash flow assures the lending institution that the business can meet all its repayment obligations without any hassle.
– Check Your Loan Eligibility Criteria
Every lender has some specific Business Loan eligibility criteria which an applicant must meet. Instead of facing loan rejection unnecessarily and getting a hit on your credit score, you can ensure that you meet each eligibility criterion to improve the chances of loan approval.
– Know The Required Loan Amount
Without knowing the exact Business Loan amount required by the business, it is best to avoid applying for a loan. To improve the chances of Business Loan approval, make sure you always calculate the exact financial requirement of the business so that it doesn’t result in a shortage or surplus of finances later on. Availing of a loan approval of a higher loan amount could lead to a wastage of finances and unwanted debt burden, whereas, an approval for a lower loan amount may lead to a working capital crunch. Therefore, to protect your business from such situations, a well-planned business budget is required.
– Make a Clear Repayment Plan
Lenders want to see that you have a plan in place to repay the loan and that you understand the financial responsibilities of taking on debt. Make sure to show them how you intend to repay the loan including the source of the funds.
There are multiple options available for Business Loans in India. However, it is important to keep in mind that multiple loan applications may hurt your business’s credit score significantly. Hence, make a calculated Business Loan application by considering the above-mentioned tips to opt for a loan successfully.