What To Do Before Applying For A Business Loan
Now that you’ve decided that a business loan is the best way to bankroll your venture, here’s a checklist of 5 things you need to take care of before you approach a lending institution.
A business loan is an excellent way to fund your enterprise, and we’re sure that you’ve researched this topic before arriving at this decision and know all about the benefits already. Once you zero in on this option of credit, you need to ensure that you prep yourself to ensure seamless access to funds that will help your business grow and flourish. If you’re wondering where to start, take a look at our list of top 5 must-dos before you approach a financial institution.
Present a fleshed out business plan
When applying for a business loan, it is important to be prepared with a full-fledged, detailed business plan that elucidates what you need the money for and how it will be utilised. The lending institution must be convinced about the credibility of your business, and your skill to use the funds in an appropriate manner. Apart from stating why you need the funds, also include market analysis and an explanation on how you will use the funds to grow your business.
Have your documents ready to go
Once you have decided to apply for a business loan, keep all your financial documents ready for submission. It does require some effort, but it is worth your while to make a short checklist of all the documents and forms you will require and get them in order. While getting a business loan isn’t a long and arduous process any more, having documents such as forms and income tax papers in place will definitely save time and give you a headstart.
Keep your financial history transparent
If you’re wondering about how to apply for a business loan while ensuring that you get the flexibility you desire, make sure that you build your credit score before applying for one. This boosts your credibility with a lending institution considerably. Apart from doing this, make sure that you can provide bank statements that show a healthy income and cash flow ratio for the past 2–3 years and also include realistic projections for the coming year or two to put the lenders at ease. It may sound like a lot of legwork, but establishing yourself as a financially stable and cautious businessperson helps promote confidence amongst loan providers.
Don’t wait till the last minute
Prudence is a key principle of any business and it also applies to how you approach a business loan. Instead of waiting till the last minute to apply for a business loan, apply for one when you anticipate even the slightest need for it. Not only is it more difficult to secure a loan when you’re pressed for time and resources, it also doesn’t give lenders sufficient time to evaluate your plans and build a relationship of trust.
Prepare yourself to address concerns
Apart from the documents, you also have to be prepared to answer any additional questions that the lending institution may have. Anticipate what these queries may be and make sure that you have substantial answers and explanations. For example, if your business has suffered an interim loss in the past, make sure you’re able to explain to the lenders why this happened and how your business successfully recovered from it. Thinking like a lender will help you identify the probable red flags and come up with the most suitable explanations.
As you evaluate lenders, one option to try is Bajaj Finserv. Not only do they offer flexible loans that allow you to pay interest solely on the amount of the loan you utilise, they also don’t require you to put up a collateral or guarantor.