If you are looking for small business loans, you can easily get your hands on one from both traditional lenders (banks) as well as alternative lenders (NBFCs). Long term and short term loan are available, depends on requirements and business plan. Being the owner of a small business comes with their fair share of hurdles and one of those hurdles is a financial crunch.
Steps one can take to secure a business loan in minimal time delay
There are some steps you should follow religiously when applying for a business loan. They are discussed in the following sections. Kindly pay close attention to them:
1. Be very clear why you are requiring business loan
The case is totally different when a small scale business owner has approached a lender for a business loan which is why you need to be very clear why you are requiring a loan. The purpose and objective must be very clear and it is also understandable by others. On top of that, if you are the owner of a start-up venture, you need to take some time out to show objective with full clarity on long term business goal.
When you are sure about why you need a business loan, the next step in the process will be to figure out the lump-sum amount you would need to satiate your requirements. Make sure that you come up with a loan amount that is at par with your financial statements and business plan.
2. Keep an eye out on your overall credit history
In case you are the owner of a business that is either a start-up or one that is less than three years old, chances are really high that the lender will thoroughly scrutinize both your personal as well as your business’s credit history.
It is one of the many reasons why you should get your personal as well as business credit history evaluated by leading credit reporting agencies.
Credit score, reports and past payments history are also part of big part of concern before going for business loan. Lenders check previous records, history, PAN profile status or any default overdue cases; by this they try to understand your profile and repayment ability.
By maintaining 750 or more credit score, higher chance of loan approval with higher amount. But if your credit score is in between 600 – 749 lenders will check many other factors or may ask more financial documents to get clarity. These cases might get approved or rejected, depends on lenders parameter.
3. It is best to go over your borrowing options
When it comes to applying for a loan, the best approach is to go for banks since the interest rate on the repayment amount is far lesser when compared to that of the rates offered by NBFCs.
It is recommended to go for regional commercial banks instead of national commercial banks as your loan application has far better chances of being sanctioned in the former. In case you are planning to apply for a loan at an NBFC, be sure that you are sitting down with the loan officer at the firm personally. Be sure to lay out in front of the person about your overall requirements, business plans and the likes so that your application has maximum chances of getting accepted.
4. Collateral or Security
Every lender wants to get maximum assurity that loan premiums will be paid timely and borrower will follow every agreed steps and processor. So most banks seek security from borrowers against business loan. It should be know the collateral or security could be any assets, equipment or business future revenue. It should be very matching and suitable collateral against the loan you are expecting.
5. Come up with an attractive business plan and Required Documents
Consider this as the one step that can either make or break your case when it comes to getting a business loan from a lender – be it a bank or an NBFC. A business plan will not only make your application look promising to the lender but it will also assist you as well.
A promising and realizable business plan is the only way you can make sure how much money you would actually need and whether you would have the means to repay the debt in time. On top of that, a business plan is a must along with the application documents required by all financial institutions.
Be sure to keep in mind that a business plan consists of several parts and should include past financial statements of your business as well as details of projects completed/handled by your business. It should also include the details of the assets you will be using as collateral to secure the loan amount.
We are living in the age of the internet which means everything is within your reach given you are agile with the mouse and know where to look for. On top of that, in order to stay ahead of their competition, modern day lenders are offering small business loans to entrepreneurs easily. On top of that, custom-tailored solutions are also available which means you will have a loan that is sanctioned as per your business’s unique requirements. Be sure to research your options and go for the one that suits your entrepreneurial needs.