Do you need a business loan and want to assure that your loan application will not be rejected? Do you want to attain the desirable loan amount without much of a hassle? Do you wish to boost your chances of securing the finance within minimum time, without visiting the bank branch? Do you wish to get the lowest interest rate on the loan? We are here to guide you regarding the ways to improve your chances of obtaining a business loan for your company in India. To know more about the business loan visit Loanbaba
- Compare Offers by Banks and NBFCs
Do not reach out to the very first offer by a financial institution, rather relax and take time to go through offers by each of the top business loan providers in India. Compare the schemes, interest rates, eligibility criteria, fees and charges, before selecting the provider you wish to apply with. Women borrowers can opt for special loan schemes by the government such as the MUDRA Yojana etc. For females, the offers are more flexible with discount on the interest rates.
- Apply for the Loan at the Right Time
What is the suitable time to apply for a loan for business? Of course, it is the moment when you require the funds the most. However, it is best to apply for loan at least 2 to 3 weeks prior to the fund requirement. If you meet the criteria for the loan, it takes around 2 to 3 days for the disbursal. If the loan is rejected, it will take few more days for you to get the loan from a suitable lender, thus time consumption will increase. Apart from your need, the financials of the company must be apt and financial statements must be sorted for submission to the lending institute to quicken the pace of loan approval.
- Make an Appropriate Business Plan
You may know the functioning of your business, but you must explain that clearly to the bank. The financial institution must understand the business purpose, market, revenue, profit, management team, executive summary, customers, investment, stakes, liabilities, assets, competitive landscape, future opportunities, costs, financial statements, risks, etc. The business model should speak for itself. There should be no scope of vagueness in the business plan so that the lending institute can rely on the company for provide funds.
- Calculate the Loan Amount to be Borrowed
Rather than asking the bank about the loan amount you are eligible for, you should know exactly how much fund is needed and how exactly shall that be utilized, and the means to repay the loan. If you approach the lender prepared, it will have a better trust on you and your organization, than if you seem to have no idea about the amount required and ways to repay the loan. Thus, do your homework well in advance.
- Know the Kinds of Business Loans Available
Though you have described the purpose of the loan, you can have multiple loan categories to select from. You must study all their details, such as terms of interest, repayment plan, tenure, etc. There are special loans for agriculturalists, small and medium sized enterprises, and start-ups. There are schemes alone for equipment financing and working capital. Thus, be sure which loan category your company needs fall in and apply accordingly to reap maximum benefits.
- Check Your Credit Report and Score
Banks and NBFCs have their own criteria of approving business loans. The foremost factor they study is your and company’s creditworthiness. Thus, the lending institute will check your personal as well as business financial records. If your credit score on the personal front and that of the organization, is not up to the mark, then there are chances of disapproval of the loan. Thus, you may want to improve the credit scores before applying for the loan. A good credit score will give you the power to avail best interest rate and loan amount.
Check your credit report for any errors, and fix those before dropping the loan application. Remember that credit bureaus usually take up to 30 days to fix an error. Settle any debts that are outstanding and lower the amount of open debts, as much as possible to help bank banks trust your company’s finances.
- Beware of the Risks that Lenders Asses
Financial institutions evaluate loan applicants based on the level of creditworthiness and financial risks. If the company seems as a risky borrower, then there is a greater risk of loan rejection. The lending institute can conclude an organization as not creditworthy, if it is a small owner’s equity, has poor revenue earnings, questionable management, poor credit history, inadequate vintage, weak accounting system, defaults at many previous loans, etc.
- Keep All the Necessary Documents
You may have the company documents with you, but do not wait to sort through those at the last moment. You will require past tax returns, information of business accounts, proof of registration and incorporation, financial value of the company, profit and loss statement, audited balance sheet, investment profile proof and other essentials. Do not fake any documents, since if the lender detects a fraud, you could be prosecuted.
- Assets for Security
An asset that has financial value can work as collateral in case the bank finds it unsuitable to offer an unsecured business loan. In such an incidence, you can apply for a secured business loan, but only if you have an asset/s of equal or higher value as that of the total cost of the loan. The collateral can be a house, equipment, the company property/land its. Thus, have a back up plan in case of emergencies to better your chances of securing the loan.
By studying the above-given 9 ways to enhance your chances of securing a business loan, you can be sure to get the right loan offer for your company.
