Adequate funds are required for the smooth functioning of a business. Small businesses need finance to meet their working capital needs, purchase inventory, plant and machinery, pay wages, and grow and expand.
Borrowing capital from banks and non-banking financial companies (NBFCs) to meet-business-related financial needs is known as a business loan. Commercial loans have become a popular and viable option as they provide the required finance in a timely manner.
Entrepreneurs may seek to improve their chances of obtaining an approval of a business loan in India.
Following are seven ways to enhance your chances of getting small business loans.
1. Have a written business plan
Before providing a business loan, lenders generally demand the business plan. The business plan must include important details such as inventory purchase, client’s payment, miscellaneous expenditure, profit estimation, and future plans, among others.
2. Meet the eligibility criteria
Small and Medium Enterprises (SMEs) and Micro, Small & Medium Enterprises (MSMEs) need to meet the business loan eligibility criteria required by the lender. This could be in regard to the type of business, turnover, profit after tax (PAT), and age of the applicant.
3. Check your creditworthiness
Lenders check the creditworthiness of the applicant along with the business credit records. The chances of getting an approval for small business loans are higher if the applicant has a good credit rating score in credit bureau.
4. Conduct extensive research
It is imperative to conduct in-depth research on various business finance options. You may compare the features and benefits of various finance options, and make a choice based on your finance needs and requirements.
5. Organize all the documents
To enjoy faster processing of your SME loan application, you may put together your documents before you apply. Lenders require photo identity proof and address proof. Other important documents required for business loan include proof of business and income proof.
6. Demonstrate a healthy cash flow
A good cash inflow proves overall healthy financial position of the business. Lenders are assured that the MSME loan amount will be repaid in a timely manner, and this improves your chances of obtaining a loan.
7. Develop a repayment strategy
You may chalk down your repayment plan keeping in mind your monthly installments and the loan tenure. This provides a clear repayment schedule, and will prove that you are a responsible borrower.
You may, therefore, keep the aforementioned points in mind before you apply for a business loan.
There are numerous financial institutions that offer MSME loan options. These loans range from INR 3 lakh to INR 75 lakhs and come with flexible tenure. Besides, you may enjoy attractive business loan interest rates and easy application. All you have to do is fill an application form and submit the necessary documents. Upon successful verification, you may get the needed funds for your business.