A huge number of Indian startup businesses fail every year just because of the lack of fund. Though business loans are meant to provide financial support to the businesses still the bitter truth is that 90% of business loan applications are reverted with a negative response. Most of those rejections are because of the ineligibility of the businesses to avail a loan.
The eligibility criteria which a business loan lender follows is slightly stringent than other credit products such as a personal loan or a loan against property. To become eligible for a business loan, the business owner, as well as the business both, are gauged with various parameters. The reason which makes lenders take a second thought on the loan approval is the risk of turning the loan into NPA. A business loan has always been a risky business for the lender as if the business can not make its mark in the market, the loan is sure to turn into an NPA. The chances or recovery of a business loan is very rare hence lenders approve a business loan application only when they are certain about the repayment of the loan.
If you own a business and understand the fact that, you may need a business loan in near future then it is better to build up some financial habits which can enhance the creditworthiness of your business. Those financial practices are nothing but your preparation for your upcoming business loan. Let’s learn the financial habits which will make you stand in the group of that 10% of people who have achieved a successful business loan.
Financial Habits to Get an Easy Business Loan
- An Efficient Cash Flow
Cash flow of a business is like the lifeblood of a business. Your payments and receivables both should be on time. If you really want your business to run smoothly, you must ensure that you are getting your receivables on time as well the payments you have to do is happening on time. If you can not maintain the balance between the incoming and outgoing fund, it can impact negatively on your business. It is better to check the credit history of your clients before you enter in any agreement with them. Receiving fund on time will help you to pay off the payables on time which is another important aspect of a better cash flow.
- Disciplined Payments
If your business or you personally owe any loan, you have to be disciplined regarding all the payments. Your personal and business credit rating is an important thing which a lender consider while lending you a loan, whether it be a business loan or a personal loan. Payments made by you towards any of your loans or clients leads to a good CIBIL score and has a big impact as it reflects your business stability and growth. There are only a few ways to maintain and improve your credit rating, among which making timely payments is the most important one. As long as you are paying your outstanding debt on time, you will retain a good credit score. This is more important as it increases your creditworthy for a business loan.
- Find Out Different Loan Options for Your Business
Most of the people are only aware about business loans but apart from a business loan there are different funding options which can help you to grow your business. Angel investors, Crowdfunding, small business loans are some of them. These options are now a days more helpful than a business loan as qualifying for a business loan may be a difficult thing for many of the business owners as it requires more criteria to be fulfilled. However, getting an investor or qualifying for a crowd funding may be a easier one as it most important thing which matters here is your business plan and your business idea.
- Meet the Lender Personally
Meeting a lender personally can also have a positive impact on your loan application. In many case, it may happen that a business loan may get rejected because of various reason, some of them can be lack of proper documents or lack of a proper business plan. When you meet your lender personally you got the opportunity to convince him/her which you were not able to do on papers.
- Be Strong with Your Documents
All the lenders looks for the documents when it comes to lend a business loan. These documents include your business license from all the required authorities including the government license. Apart from this, there are other documents too which are required while you apply for a business loan these includes your IT returns for the last 2 years and your personal and business details.
- Build a Strong Business Structure
Business structure is the basic this which is required to run a business. When you go to a lender asking for a loan, the first thing which attracts them is your business plan. Your business plan should be so strong that it guarantees profit in near future. Your business structure should include small to big requirements from staff to the inventories. Remember if you are successful in creating a strong business structure you have the capacity to convince your lender.
Following these Financial Habits will surely improve your finances and can Help You to Get a Business Loan Easily.