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
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.
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.
Created on Jun 27th 2018 05:54. Viewed 572 times.