If you live in the city, you probably find new food joints and cafes that crop up all the time. More often than not, small businesses like this shut shop for lack of capital or funds.

Flow of capital is very important for any business to grow and expand. And if you are looking to expand your business, a small business loan from Bajaj Finserv might be the right option for you. But, before you seek a loan, make sure that your 3Cs are in order.

What Are The 3Cs, You May Ask? Well, Here They Are:

Cash Flow, Collateral, Credit Score

Cash Flow

Cash flow is the first of the 3Cs. Lenders take a close look at your financials such as the monthly revenues, profits, bank account details and credit statements. But most importantly, they evaluate your cash flows.

Profit is the surplus amount after all the expenses have been deducted from the revenue. On the other hand, cash flow is the total money that goes in and out of the business. It is very important for day-to-day operations such as operating costs, paying employees and purchasing inventory. A company can appear to be profitable but it can still fall into bankruptcy if the cash flows are not good.

How is that even possible? Let’s take an example:

Imagine that your company manufactures chairs. The company might be selling chairs at a profit. But what if your biggest wholesale customers do not pay you back on invoices for more than 60 days? This is not very uncommon in businesses. However, the company may depend on this money to pay the suppliers. And if you don’t get back your money on time, you cannot pay your suppliers.

This can result in a situation where your creditors may force you into bankruptcy to get back their money. So, essentially the company becomes bankrupt even though it has recorded amazing sales.

So why is cash flow so important for lenders?

Banks and Non-Banking Finance Company (NBFCs) check the cash flows to find out if the company has the resources to repay the loan instalments on time. A high positive cash flow means that the company’s assets are growing. This means you have the capability to repay your creditors on time without going bankrupt. This increases your chance of getting a loan.


Collateral is something that you pledge as security when you take a loan. Lenders ask for collateral to ensure that borrowers have a secondary source of income for the repayment of loan. So in case you default on the loan, the lender can take away the collateral you had put up earlier.

Borrowers can use several types of collateral in order to get a loan. You can use any asset such as deposits, equipment, buildings, vehicles and even inventory.

Every business has a bank account. So, a new business that has few securities can use the deposits in the business bank account as collateral to avail a loan. However, this option is not limited to new companies. Any small business can choose to put up its deposits as collateral for a business loan.

The equipment and buildings owned by the business can also be leveraged to avail a loan.

So what should you do?

Make a complete list of all the assets you have which can be considered as collateral. This way, you can weigh the different options you have before you approach a bank or Non-Banking Finance Company (NBFC) for a loan. It is important to understand that in case of default of the loan, you may have to forfeit the assets. So be very careful what you put up as collateral. You don’t want to put up anything that you cannot afford to lose; your house, for example.

Credit score

Imagine you are a new business owner. The company is still in the initial stages and finance is necessary. You want to take a loan but you don’t have any valuable assets to put up as collateral. Does this mean that you cannot get a loan? Not necessarily. The lender might look at other options to check if you can be eligible for a loan.

One of the first things the lender checks is credit score.

The lenders may evaluate your personal credit history. In other words, your personal financial management skills can be used as a metric to decide if you are eligible for a business loan. If your CIBIL score is found acceptable, you may be eligible for the loan.

So, before you approach the lender, find out your credit score. If there are any errors in the credit report, make sure that you contact the authorities and get it rectified right away. Also, ensure that you don’t default on any of your existing loan payments. This reflects poorly on your credit history.

Also Read : How To Get A Small Business Loan

To sum it up

Finance is the life blood of any successful business. And contrary to what you might imagine, there are numerous lenders ready to offer loans to new enterprises. However, the only caveat is that the business should be able to repay the loan on time. So, make sure your 3Cs are in order before you seek a loan. Bajaj Finserv is one such lender offering business loan at attractive rates. You can check about the eligibility and even apply for a business loan on its website.

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