Availing a business loan becomes a necessity for growing your business and for ensuring that the business runs smoothly without any hiccups. Though there are a lot of options for availing business loans, borrowers are often intimated about the approval of their loan application. They fear that their application might get rejected or the acceptance might take a long time. If you too are concerned about availing easy approval for your business loan application, here is a checklist which would increase the probability of loan approval –
- Create a well-defined business plan
Business loans are unsecured loans and lenders feel edgy in offering the loan to businesses without clearly defined plans. When you apply for a business loan, lenders often need to know where the funds would be put to use. To be able to meet the queries of lenders, you should make a detailed business plan. The business plan should include the following details –
- The amount of loan which is needed for the business
- A detailed plan which shows the usage of the loan
- The short term and long term business goals and details of the goals that are being fulfilled by the loan
- A projection of cash-flows of the next two to three years to estimate the expected profitability. This would also help in showing stability of the business in years to come
- A proper plan in place for repayment of the loan which you seek
If you are prepared with a well-defined and well-documented business plan, lenders feel more comfortable in offering you loans and you can get easy approvals.
- Ensure you fit the eligibility criteria
Business loans are offered to businesses which fulfil the eligibility criteria prescribed by lenders. So, before applying for a loan do a complete analysis of the eligibility requirements to ensure you fit the criteria. Usually, the eligibility criteria include the following –
- Applicant’s age should be between 21 to 65 years
- Loan can be availed by self-employed professionals and non-professionals as well as companies
- The business should be in existence for at least the last 5 years in case of self-employed non-professionals and 3 years for self-employed professionals
- The annual turnover of the business should be at least Rs. 1 crore
- The business should have a bank account in a bank for at least the last 6 months
- The borrower should have a house or other assets in his name.
If you fulfil these basic eligibility requirements, you can apply for the loan and it would be approved.
- Have a good CIBIL score
The CIBIL score is an important tool for measuring the credit worthiness of the business. It also forms a part of the eligibility requirements. It depicts whether the earlier loans and credits of the business were paid in time or not. Lenders allow business loans to individuals with good credit scores which are above 650. So, ensure that you have a score which is more than 650. If not, improve your score before applying for the business loan.
- Have all the documents ready
Business loan applications should be supported by relevant documents of the business. If the documents are in order, the loan is approved easily. So, have all the documents in place which are required with the loan application. Also keep handy other documents which the lender might ask in special circumstances. Some common documents of the business and the applicant which you should have at your disposal includes the following –
- Identity proof
- Address proof
- PAN card of the business
- Income Tax Returns of the last 3 years
- Bank account statements of the last 6 months
- Certificate of business existence
- Business profile
- Look around for lenders
Not all lenders have the same lending practices. Different lenders would offer you different amounts of loans and the interest rates would also vary. Moreover, different lenders have different eligibility criteria too. So, look around for the available business loans. If you don’t meet the eligibility criteria of one lender look for another. Calculate business loan EMI of multiple lenders to know the effective difference in the interest rates charged by different lenders. Compare the EMIs and choose the amount which is the most affordable for your business.
So, follow this checklist before you apply for a business loan. If all the points of the checklist are ticked you can rest assured that your business loan application would be approved easily.
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