6 Things To Do Before Signing Up For A Business Loan
Looking to take your business to new heights? Turn to a business loan to help with your financial requirements. A business loan is money borrowed by its owner strictly for business purposes like expansion, purchase of assets and acquisitions. Depending upon your need, you can opt for a secured or unsecured loan.
While unsecured business loans can be taken without submitting any security or collateral, secured loans require you to submit a valuable asset as collateral. Before making the final decision, it is important to make sure that both you and your business are well prepared to take on this responsibility.
Thus, here are a few things you should look into before you apply for a business loan:
Finalise Your Purpose:
Before applying for a business loan, it is extremely important to finalise the purpose for which you need the money, whether it’s to raise working capital, purchase machinery, expand your business, or improve its infrastructure. This is essential so that the sum you borrow is closest to the estimated expense or investment.
Estimate Your Costs:
Get in touch with a professional like your company accountant and find out how much it would cost to get the ball rolling on your business plan. Then you can arrive at an amount you seek to borrow.
Prepare an Appropriate Business Plan:
A business plan shows the lender the important details of your business like the market details, your expansion plan, your assets and your liabilities. A firm business plan is important for a lender to ascertain the creditworthiness of your business. The more secure your business plan, the greater your chance of getting your loan approved.
Collect and Organise your Financial Statements:
When you’re filing your application for a business loan, make sure you have your financial statements, like those pertaining to cash flow, income and balance sheet, in order. They help the lender analyse the flow of cash in your business and determine your financial ability to repay the loan.
Review your Credit History:
In case you have borrowed money for your business in the past, make sure that you have a clear track of your credit history with records of all the money you have borrowed and paid. Credit history is a depiction of the creditworthiness of your business and its ability to repay loans. Ensure that you have a good credit history or make moves to improve it to increase your chances of getting the loan.
Choose Between Unsecured or Secured Loans:
While unsecured loans may seem more convenient and safe, it is important to note that these loans are difficult to apply for. Unsecured loans do not take any form of collateral and hence have difficult eligibility requirements. They may also come with higher interest rates. Secured loans on the other hand take some business asset as collateral, but have significantly lower interest rates and are easier to apply for in comparison to unsecured loans.
If you have big plans for your business and are looking for a viable financing option, you can apply for a business loan at Bajaj Finserv. Here you gain from low interest rates, absence of collateral and a convenient line of credit facility that helps you make the most of your loan.