Every business owner knows how much effort and capital goes into running a business. You are also continuously striving to grow your business. Although your company might just be running smoothly right now, there are multiple uses of a Business Loan that you can think of. It can be used to restructure your business, move into a more prominent office, restock your products, or even to open a new branch in a new location. However, getting a Business Loan is not always the most natural thing to do, and if by chance your loan gets rejected that would result in a bad credit score that would also cause problems later if you have to apply for another loan. Here are a few points that can help you understand the process of Applying for a Business Loan that can make it easier for you to get your credit approved.
What lenders look for?
When you apply for a loan, the bank or the non-banking finance companies (NBFCs) will look into a couple of factors before your credit gets sanctioned. These factors include:
• Your credit score: This is one of the most important factors that determine if the lender will approve your loan. They look into both the company’s credit score as well as your personal credit score. Banks understand that the credit score of your business depends on the kind of business. This means that your loan wouldn’t automatically get dismissed if your business credit score is low. However, your personal credit score should be acceptable or that could lead to the rejection of your loan.
• Revenue and cash flow: Before they approve your loan the banks and NBFCs would look into whether or not you will be able to repay your loan. They would ask you to present them with documents such as your cash flow, and your profit and loss statements. If the statements that you provide to them show that you will be able to repay the loan, then there is a high possibility that your loan will be approved.
• Business plan: When starting a business, you need to have a clear idea of what you want to do. Your goals and aspirations for the business should be clearly defined and should also be reflected in the business plan that you provide to the bank or lender when you apply for a business loan. You need to show the lenders that you have a concrete plan for how you are going to use the money or you risk your loan getting rejected.
• Savings and capital: If you have any money kept aside as savings for your business that you plan on putting into the business at a later stage can help you improve your chances of getting the loan. This money that is kept aside is viewed as a surety for the bank that if needed you would be able to use this money to pay back the loan. Your savings is the safety net that you would need to ensure that you would be able to repay the loan.
• Identify risks: There are a few traits that a lender would deem risky while assessing your Business Loan application. These traits can include a weak accounting system, low vintage, irregular revenue, and defaults on multiple loans. If they find any such trait in your profile, they may refrain from giving you a loan.
How to apply for a Business Loan?
Once you are familiar with the risks that are involved with getting a Business Loan approval, you need to ensure that you avoid all of these risks and get your loan approved in the first shot. If you follow these points, you will be able to apply for the loan easily and ensure that it does not get rejected –
• Financial documents: Most institutes have their own requirements when it comes to the documents that you have to submit to the bank. You need to make sure that all of your documentation is kept in order before you apply for the loan so that whatever the lender asks you for you can submit without having to worry about the loan getting delayed.
• Executive summary: This is a document that will outline the kind of business that you are and it should also include the amount of loan that you need from the lender.
• Resume of the business owner: As a business owner having a resume may seem futile, however, it is a very important document when you are applying for a loan. If two or more individuals are running the business, all of their resumes have to be provided. This is for the sole reason of showing the bank the kind of experience that you may have in your field of business.
• Business profile: Before they give you the loan a lender would want to know you a little more. They would need to know what kind of business you run along with the financial documents that are needed. This is for the loan provider to get to know your company better and increase your chances of getting the loan approved.
• Loan proposal: Banks and NBFCs are usually swamped with loan proposals; you need to set yourself apart from the others. Here you have to give the exact amount of money that you want to borrow along with the plan for how you would be using this money.
Now that you are aware of all of these points it will end in you getting the loan approved and future advance your business.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
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