4 Steps to Take Before Applying for a Business Loan
Starting a business of your own can be daunting. There are so many things to keep in mind. The quality of your product or service will be crucial. So how will you manage the marketing. You may have to hire people or rent a space. All of this will cost money. So what do you do? You might want to think about getting a Business Loan.
Even if you have some money saved up, a Business Loan for a new business could help you immeasurably. A working capital loan could help you smooth out your operations. If you need to spend on equipment, a business investment loan could help. But before you go about applying for a small Business Loan, make sure to follow these four steps:
Steps to Getting a Business Loan
Create a Business Plan:
What do you need to get a Business Loan? The first step is to create a viable business plan. Do your research. Analyse the market. Estimate what you need to invest in and what your cash flow could be like. This will help you gauge the needs of your business in a better way.
How will this help your loan application? For starters, you can then make a better estimate of how much loan you need. Show the lender how you plan to use the money. Lenders appreciate business owners who do their homework. A good business plan suggests that you would be just as disciplined in making the Business Loan repayments.
Getting a Business Loan is not difficult these days. But avoid depending only on the loan you could get. A loan for a business start-up is fraught with risk for the lender. So, the lender may safeguard its risk by providing you with a smaller loan.
For that reason, it helps to have some money in the bank. Besides, your business could take some time to start generating profits. A decent financial cushion is important from the lender’s perspective as well. It indicates that you can make the repayments on time.
Do Not Ditch Your 9-to-5 Job:
Many entrepreneurs give up their day jobs too soon. Everything may look promising. But you never know which business might fail and which might succeed. Besides, your job gives you added security. The salary you get each month convinces the lender of your ability to repay the loan.
So, it is a good idea to start your business while still with your current employer. It may be hectic, but you will get a good idea of how things work. Also, once you quit your job, lenders may be less willing to extend you a loan. After all, the lack of cash flow may cause you to default on the monthly payments.
Look for Investors:
You could be looking for an angel investor, venture capital, or a Business Loan. Just make sure to get your research in place. You need to justify your financial requirements. A good business plan will help, of course. But you also need to zero in on the right investors.
When you look for investors, find the ones that suit your business. Say you want to take a bank loan. You would need a basic cash flow or enough savings to pay the instalments. A venture capitalist is an option, but only if you plan on selling the business at a later point. You also need to ensure that the investor’s terms and conditions do not hurt your fledgling business.
Also Read: All You Need to Know About Business Loans
If you are wondering how to get a start-up Business Loan, begin with these four steps. They will help you lay the groundwork for a successful business from the very outset. You should approach getting a Business Loan in a systematic manner. Check your credit score beforehand. Clear up any liabilities you may have. Compare different lenders and loans before finalising a deal.
Bajaj Finserv offers Business Loans to give you access to credit to fulfil your business aspirations. You can avail a Business Loan worth up to Rs.30 lakh online, at the push of a button and use it to expand your existing business or invest in a new one without pledging anything against the borrowed amount.