Business Loan Application
Are you planning to apply for a business loan in the near future? Well if you are planning so, there are several things which you should prepare for.
Lending money is risky even for the banks, and to minimize the risks involved lenders/banks ask for certain things to the applicants when they apply for a business loan.
So, if are among those who are looking for funds for your start-ups to expand it? It is a must for you to know what the banks expect from you and how you can prepare yourself to avoid any rejection for your business loan application. Take care of these things will not only ensure your business loan approval but it can also make the process faster.
Lenders have some exceptions, to ensure complete repayment of the loan, and among those expectations having a proper business plan comes at the first.
Lenders want to understand the summary of the business/company. It’s not to show all the things you have planned, but your plan should be realistic and should contain a brief idea about your product, market, staff, and financials of course.
Your business plan should be documented well and the most important thing, it should be convincing.
In India, most of the lenders provide an unsecured business loan, but in the case of a higher business loan amount lenders may ask for collateral.
In order to avail of a collateral-free business loan, you must have a higher repayment capacity.
A bank also may not ask for security in case, the business for which you require loan is well settled and successful.
Mostly starts-ups are risky and you need to provide security to avail of a business loan for it. The security you pledge can be any assets such as your land, home, commercial property, gold or your business machinery, etc
Purpose to Avail the Business Loan
As discussed above lenders do ask for a business plan, seeing the plan the lender may want to know the area where you are going to utilize the borrowed amount.
So, before you apply for a business loan, you should know very well about how and where you are going to use the loan. Basically, without having a proper calculation and idea for the end-user of the business loan, the lender may hesitate to approve your business loan.
Financial Details of the Existing Business
For existing organizations, it’s a standard that the borrower must show proof of least turnover per annum. The turn over varies from company to company and it’s on the lender’s policies that how much they consider eligible to lend. Henceforth, an entrepreneur should arrange all the money related documents of the current business as a report and submit it while applying for a business loan.
The total budget reports ought to be evaluated and investigated by a sanctioned record to get faster approval.
Business Permit & License
Any business either small or big, new or old will require permits to operate or allow to work legitimately. The banks need to check whether you have a legitimate business activity with the authorization of the Government. Authorizations, for example, fire, wellbeing, natural and zonal licenses might be required for accommodation alongside your business advance application.
About Your Personal Finances
This incorporates government managed savings numbers, total assets, subtleties on resources and liabilities, for example, your home, vehicles, venture accounts, charge card accounts, automobile credits, contracts, the entire thing.
For organizations with various proprietors or associations, the bank will need fiscal reports from the entirety of the proprietors who have huge offers.
Your Personal & Business CIBIL Score
At the point when you start up a business, you have a different credit record which is not the same as an individual credit record. Consequently, to find out the unwavering quality, the banks check both accounts, personal & business for a proper financial assessment. Likewise, when a bank doesn’t have adequate data about the business, your personal financial assessment turns into a deciding factor for business credit qualification.
In any of the cases, the loan is allotted only to those who have a good CIBIL score. This is because a good CIBIL indicates a good credit history and thus, lenders consider it safe in terms of repayments and hence approve such loan applications easily.
Funds are the basic and most essential requirement for any business organization whether small or big, for smooth functioning & existence. The lenders have fixed their eligibility criteria in order to approve or reject a loan application. So, if you want your business loan to get approved, then you have to take care and prepare in advance before you apply for it.