All You Need To Know About Applying For A Business Loan

Over the last few years, business loans have slowly gained popularity. More and more entrepreneurs and start-up are opting for this financial aid to run their business. If you are in the market for a business loan, here are some of the factors you need to keep in mind before you begin the application process.

What are the factors to consider before applying for the business loan?

As a borrower, you will need to consider all the costs associated with setting up the new unit. This will include

· Raw materials product inventory or manufacturing equipment.

· Other costs will include establishing a legal structure and trademark

· Administrative costing

· Electronic and digital equipment installation

What are the basic documents needed for the business loans?

Most of the lending institutes require the following documents as a part of the loan application:

· Financial statements: This includes statements of the past two or three years, balance sheets and income statements in addition to the current financial statements.

· Accounts payable and accounts receivable among others.

· Business profile: Details pertaining to the profile of the company, size of the company, profile of the owners and members of the management.

· Repayment strategy and plan: How do you intend to repay back the borrowed funds

What is the eligibility criteria for the business loan?

The given factors are the broad eligibility criteria in order to avail the business loan. They main requirements include the following:

• Credit history: As a borrower, you should be aware of your credit score. It should not only be up to date, but it should also be accurate. Having a sound credit history will ensure that lending institutions are favourable to providing the required finance for your business unit. Based on your credit score, the lending institute will not only decide whether you are a risky applicant but also determine how much of funds you are viable for.
  
  

• Business Turnover: Most lenders consider the functioning of the business to understand how they stand in terms of affording and repaying the loan. This is normally calculated on the basis of the turnover of the business. In most cases, the annual turnover of the business should be between Rs. 10 Lakhs and Rs 100 Crores. At the same time, you will need to prepare statements which includes projections to help lenders understand the feasibility of the project or the unit in the near future. In addition to this, your business should have a continuity for the last three years, while indicating positive trends in the turnover. In this case, the profit should be in the last 2 years. Besides this, your income tax returns of the last 2 years should also reflect a taxable income of above Rs. 2 Lakhs per annum.
  
  

Business plan: One of the key factors that play an important role in acquiring business loans is a robust business plan. You will need to convince the lender that your business has the financial stability it requires. You will need to convince the lender of the overall plan layout. This will include capital estimates, operation outflow, marketing and infrastructure and asset allocation.