How to Qualify for a Business Loan?
by MyMoney Mantra FinTech (Financial Technology)Businesses,
especially start-ups and small and medium-sized enterprises, often need
additional funds when it comes to expansion of their capacities, purchase of
new assets, or an impending diversification. It is to help the business meet
such needs that commercial banks and online lenders offer Business Loans at
attractive interest rates and easy repayment terms. However, getting a Business
Loan isn’t as easy as borrowing a 500 rupee note from your friend.
To Apply for a Business Loan Online or file an application to a bank, you
need to have a detailed business plan, and an absolute amount that would help
you meet the needs of the said plan. Besides, you will also need to highlight
the strategy that you will be using to execute it along with the payback that
you expect from the plan so that the lender can count on your ability to repay
the loan. Sounds overwhelming? Well, it doesn’t need to. We will help you
understand all the aspects regarding how you can qualify for a Business Loan,
and get that much-awaited approval at the earliest possible.
Understanding Your Financing Needs
Before
you go ahead to contact a prospective lender for the Business Loan, it is
highly advisable that you actuate the intention for the credit. Gain a clear
picture of the current revenues as well as expenses of the business, and
contemplate whether you can meet a part of the need for excess funds on your
own.
The
key here is to depend as little on an outside loan as possible, as the credit
comes at a price and a long-term financial obligation. Of course, this is only
true for an ongoing business. For a start-up, you may have to entirely depend
on the loan for purchasing fixed assets and for meeting the working capital
needs.
And
while you should take efforts to minimize the loan amount, you should not
overlook any critical aspect that might need a capital infusion. Whether you
need funds to kick-start your dream venture or to expand your existing
business, you must consider all of the below-mentioned heads:
• Cost of capital assets
• Working capital needs
• Overheads
• Contingencies
Regardless
of your financial goals, it is safe to say that you must calculate an
additional 10% of the required funds and set it aside to meet any contingent
needs.
Preparing a Business Plan
Drafting
a business plan essentially the most significant aspects of qualifying for a Business
Loan. Your business plan must comprise of the following elements:
•
Purpose of the business
•
Style of operation
•
Previous financial statements
•
Current and future business strategy
•
Financial projections
Not
only will an elaborate business plan help the lender believe in your business
and your ability to repay the loan, but will also help you get a clear picture
of your resources as well as the pathway to the success of your venture. If you
are not adept at creating a business plan, you can almost always take the help
of one of the many tools available online which can help you create a
streamlined program.
Accounting for Other Factors
When
you set out to prepare your loan application, you must give due diligence to
factors that can help enhance the possibility for the approval of your loan. In
this respect, you must feel free to showcase the regular flow of income that
supports the fact that you can meet the operating expenses of the business,
while comfortably paying the EMIs (Equated Monthly Instalments) towards the
loan.
Besides,
you must look out for ways to improve the credit score for your business and
ensure that it is above 700. This will assure the lender of the financial
health of the enterprise and will help catalyse the approval of your loan.
Next,
check if you have collateral that you can pledge for the loan. This will lead
the lender to believe that they have an alternative to fall back on, thus
guaranteeing a quick approval for you.
The
key here is to make the lender see a proven track record of repayment of debts
complete with positive cash flow.
Preparing the Requisite Documents
For
the quick processing of your Business Loan application, you must ensure that
you submit all the requisite documents, right in the first go. Below is a
comprehensive list of the documentation for your perusal. You should arrange
all the documents from the list that are relevant to your enterprise:
•
Bank statements
•
Personal credit report
•
Business credit report
•
Income Tax Returns
•
Commercial leases
•
Business licenses
•
Articles of incorporation
Now
that you are aware of the critical aspects of qualifying for a Business Loan
all that is left for you to do is start looking for reputable financial
institutions which can offer you the desired credit at compelling interest
rates. Ideally, you should approach 3-5 lenders so that you have the
opportunity to analyse the features of the loans and go for the one which best
suits your long-term financial objectives.
Also Read: What Are Collateral Loans and How Do They Work?
To
apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com,
the leading online lending marketplace that offers financial products from 60+
Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free
at 1800 103 4004 to know more about our products and offers.
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Created on Jun 27th 2018 05:54. Viewed 786 times.