Every business requires money to survive. Whether you’re putting resources into a new business or expanding your existing business, you require cash to fulfill all your needs. In such circumstances, your most logical option is to get a business loan. However, before applying for the loan, you need to follow few steps for easy approval.
- Prepare a good business plan:
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Before applying for a business loan, you must prepare a good business plan for the lender. Your business plan should clearly show your project’s objective, marketing strategies, etc. Make sure you have a solid revenue model and a clear roadmap as this will help the lenders to judge the business’ feasibility and repayment capacity.
- Improve your credit score:
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Before applying for a business loan, you must check your credit score. People with low credit scores usually have a history of defaulting on loans or credit card bills repayments. Thus, always ensure to repay your dues on time to have a good credit score. Take out your credit reports at regular intervals and if any error, report it to the bureaus or lenders for rectifications.
- Keep documents ready:
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Make sure you have all the required documents before applying for a business loan. Documents required by lenders include entity’s proof, last few years’ income tax returns, audit reports, KYC documents, bank statements, etc.
- Know which type of loan you need:
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Before applying for a business loan, it is better to understand the type of loan that works best for you. It is good to know the details of various loan categories – in terms of interest rates, tenure and documents required to procure them. You can consult the lender to borrow profitably.
- Research your borrowing options:
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In order to find the bank or lender that will offer you the best deal, you will have to do a lot of research. Don’t fall for large banks that seem to have great offers before you look into smaller banks and credit unions first. They may give you a better chance of getting approved. So, before applying for a business loan, you can compare offers and interest rates of various lenders through online aggregators.
- Check your cash flows:
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If you have a high revenue generation, the chances of getting the loan approved are also higher. On the other hand, if you have a weak history, you may either be charged a higher interest or your loan application may get rejected. Hence, double-check your cash flow statements and projections to ensure that you would be able to repay on time.
7.Apply for a loan amount based on your repayment capacity:
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Determine the loan amount that you can easily repay in future. If you apply for a loan amount which is higher than your eligibility, it can lead to rejection of your loan application. So, make sure you choose the correct loan amount that you can comfortably repay in future.
- Business existence:
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For new businesses, start-ups and loss-making businesses, chances of getting an unsecured business loan are low. In this case, you should explore options for secured business loans. Generally, banks offer loans to businesses with the minimum business existence of 3 years.
Conclusion: If you are planning to take a business loan, ensure that you follow the above-mentioned steps for hassle-free approval of your loan. Also, make sure you have a good business plan and solid revenue model for the same.