Most information available on loans is overwhelmingly about housing or auto or personal loans. If you are a business owner looking for a business loan, here are some tips on how to qualify for one.
Tips for a successful business loan application
Here is how you can maximise your chances of success when you apply for a business loan.
a. Have a sound business plan: Banks will lend you money if they think that you have a clear idea on how the money will be used. Before you apply for the loan, create a detailed business plan including cash flow projections. This will help lenders get good idea of how their money will be deployed and the expected results.
b.Check your eligibility: Most banks have a set of eligibility criteria with regard to business loans which could include the minimum turnover, number of years in business and minimum annual income. It is important to make sure that you qualify for each of these beforeyou apply for the loan to avoid the possibility of being rejected. Some banks allow you to check your eligibility online in a couple of minutes.
c.Have all the required documentation ready: Many loan applications are rejected because the documentation is incomplete. If necessary, speak with a lending officer to get an accurate idea of the kind of documentation required for a business loan. This will include ID and PAN card details, latest bank statements, latest ITR returns along with a CA certified balance sheet among other requirements.
Other tips to keep in mind when applying for a business loan
Estimate the size of the required loan accurately: Make sure that you have a good business plan that justifies the size of the loan you are applying for. If you ask for too little you might run out of working capital, if you ask for too much, lenders might question your credibility.
Choose a bank you have previously worked: While this is not essential, it helps smoothen the loan process if you have had prior dealings with the bank and they are familiar with your company. However, in the end, you need to apply to the bank where you think you are getting the most favourable terms.
Identify an asset that you can offer as collateral: It always helps if you can offer some substantial asset as security to the bank. This will make the loan process easier.