Tips To Ensure You Find The Best Business Loan
If you are a small business, you may frequently require a loan. Your business could demand new equipment or you may need to pay off dealers. You could also need the cash for payroll and inventories. Money is essential for a business as it helps maintain a cash flow.
Occasionally, you could face a cash crunch. There are numerous options you can choose to overcome this. Banks and non-banking financial companies (NBFCs) are still the best bet for financing your small business.
Here Are A Few Tips To Help You Get The Best Business Loan:
Explain Why You Need The Loan
Lenders offer small business loans based on the borrower’s business loan eligibility. But it helps to be specific about why you need the loan. Start by preparing a brief. Provide a descriptive business plan. The lender may gauge from this plan your knowledge of the market you are operating in. Besides, the lender may wish to see how you plan to generate revenues for the company.
Check The Credit Score of Your Business
When you apply for a business loan, the lender may look at your Company Credit Report (CCR). CIBIL prepares this credit report for business organisations. It tracks the credit history of your firm and looks at your company’s profile. Have you made timely payments in the past on behalf of your business? Have there been any payment defaults in your books? All this may reflect on the credit score. It is always helpful to collect the CCR before approaching the lender.
Leverage an Existing Financial Relationship
Had you taken a loan earlier? Then approach the same lender again. If you repaid the past loan in a disciplined manner, it will help your case. A lender with whom you already have a relationship may offer you a lower rate. Or you could negotiate for more flexible repayment terms. For instance, you may have a savings account with a bank or a fixed deposit in an NBFC. These institutions may also be ready to offer you a business loan.
Check Up on Collateral Needs
Before lending to you, the lender may ask for some collateral, such as property. The lender might fall back on this to recover the debt if you default on repayments. But not everyone can put up collateral for a business loan. Your personal assets may not be adequate. Or you may be paying off a home loan where your house already serves as collateral. The good news is that you now get collateral-free business loans. There is no need to review your assets or arrange for property documents. This speeds up the loan processing as well.
Be Ready for Paperwork
Keep all your documents ready. These will include bank statements and income tax returns. Keep handy your profit-and-loss statements as well. Remember to update all your personal documents. This could include income tax filings for the past few years. The lender may also ask for copies of your Aadhaar and PAN card and your current credit report. If you are providing property as collateral, provide the necessary ownership documents.
Don’t Make These Application Mistakes
Be smart about your loan application and avoid these mistakes:
o Applying for a bigger loan than you are eligible for: If you apply for too big a loan, the lender will reject your application. So, check your eligibility first. An online eligibility calculator can help.
o Applying without checking the lender’s requirements: Many lenders do not provide loans to young businesses. Did you know this? Bajaj Finserv, for example, lends to businesses that have been running for at least 3 years. But to know these details, you must check the lender’s website. Before you apply for a loan, make sure your business ticks the right boxes. Otherwise, you might face rejection of your loan application.
Also Read : Advantages Of Availing A Business Loan
The Bottom Line
Before you apply for a loan, make sure to do your homework. Look at lenders that offer low business loan interest rates, of course. But also look at the lender’s reputation and customer service. See what else they can offer you.
For example, Bajaj Finserv provides a business line of credit facility and flexi loans. Both of these features allow you to save on the interest outgo.