Some Rules to be followed while taking a Business Loan

Availing a business Loan:

To retain the continuity of a business timely funds are needed to make it grow and be successful. Sometimes, the business houses do not have adequate funds to operate the business in the direction it should be. Here comes the concept of business loan in which an owner or entrepreneur can avail funds and needed amount from banks or lenders to properly operate the business. But in order to avail proper loan amount some ground rules are to be kept in mind by the applicant before applying for the business loan.

 Related Articles: Eligibility Criteria for Business Loans and Benefits of Business Loans

Rules to follow for availing a Business Loan:

There are checkpoints that a person should always focus on before availing or applying for business loans in India. There are rules that must be followed in order to get the loan sanctioned easily and hassle free. These points are-

• Have a proper and detailed business plan- For availing a Business Loan the entrepreneurs or start-up enthusiasts must be ready with a detailed and sound business plan to the creditors. This is to provide a basic knowledge about the business idea and its growth potential to the lenders.
• State the amount of money or loan needed very clearly- It is always advisable to the applicants to always state the amount they want to avail clearly. This amount should be exactly what is needed and neither over nor under as per your requirements. For this the applicant must analyze the business option and do thorough research on each and every factor to have a proper estimate regarding the needed funds.
• Keep an eye on the credit history and make it the focus point- One must focus on their credit score history for availing different types of business loans in India easily. Good credit score means application for loan will be processed and passed easily and poor credit history means lower chances of getting the loan or rejection of the loan application by the banks or lending institutions.
• Clean up the credit history and the report- It is usually advised that one must keep regular checks on the credit report for monitoring your credit scores. If there are errors and discrepancies in the report then the applicant must seek expert advice in order to clean the credit history and make for a good credit score before applying for the business loan.
• Maintain the financial statements and records properly- A properly maintained financial records and statements means an easy scrutiny process for the bank while verifying details before sanctioning any loan amount. Financial books help the bank to understand and ascertain the loan repaying capacity.
• Always state how the amount of loan and finances is intended to be spend- Usually, the banks are interested to know how the applicant is planning to spent the funds that he/ she is availing. This makes it clear for them how the availed amount will meet the applicant’s requirements and needs. 
• Never borrow more than what you can afford or repay- One might think to take bigger business loans and will be tempted by various loan schemes available for business but it is advisable to business owners to only avail funds that are needed and not what they want. Since, business loans are specifically for the business needs and operations then applying an amount more suitable for it is in best interest for the owner. They should avail the amount that they can afford at a particular time or that they can repay in future and should not burden themselves with high loan amount and interest rates.
• Always shop around or in simpler words assess the available lending options- Before applying for a business loan one must do all the research and evaluation on the different loan options available to them. And after thorough examination a business loan most suited to the needs must be availed.
• Have all the required documents ready and handy- The applicant should complete all the required documents and arrange for them beforehand so that at time of application lack of documents doesn’t becomes a reason for rejection of the applied funds.

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Created on Nov 17th 2019 20:18. Viewed 388 times.

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