Whenever you apply for a business loan, you want the lender or financial institution to offer you the best deal, quick approval and fast disbursement of the loan amount. There are specific points which need your attention before making a business loan application. Such points are helpful for the borrowers to get an instant and approved business loan.
Sometimes small mistakes can cause rejection of your business loan application. Hence it is important to check your application carefully before submitting it and also fullfill the eligibility criteria. Look at the mentioned points to get approved loan.
Things To Consider Before Applying For A Business Loan:
There are certain aspects of business loan application which you need to understand before proceeding with it to make it more acceptable. Here are some of these factors:
- Get your documents in order and check your options
Organize all necessary business loan documents before making an
application. A checklist for papers is available on every lender’s website for
your reference. There are two things you need to do before getting started:
your financial and non-financial documents – Every lender requires a set of information from you,
mainly regarding your identity and financial position. Use the application
document checklist to organize your credentials and make them ready for
the loan application process.
- Understand your options – Check the type of business loans available, different lenders, their terms and conditions, and the process of application. It will help you in making the best decision.
- Select the best lender and the appropriate mode of application
You can avail a business loan from a bank or an NBFC. You must weigh their terms in the light of your needs and make the selection of a lender. You can also select the mode of loan application as an off-line or an online mode. Generally, the online method of loan application is a better option as it offers easy application procedure, faster approval and disbursement of the loan amount, facility to compare and apply to multiple lenders through one application, and online application tracking facility.
- Think like a lender and not as an applicant
As you wish to check the suitability of a lender for a loan, the
lender would also want to check your credentials and eligibility before
processing the loan application. Hence, review your application from a lender’s
point of view. Check for all the necessary documents and eligibility criteria.
Review the following points as a lender would do and assess the chances of
acceptance of your loan application:
- The loan amount – Most lenders would not approve a loan amount higher than 8% to 12% of your annual revenue. So, deciding the loan amount is very important.
- The purpose of loan – It is easy to get the loan approval if it is for the expansion of your business or increasing your working capital. A loan to buy out a partner or take over a new business is difficult to avail.
- Your Credit score – Any personal credit score above 700+ is a good one for loan approval. You can improve your credit score before making a loan application.
- Annual revenue generation – This decides your re-payment capacity. Better the revenue, better are your chances of getting a loan.
- Bank balance and Profit and Loss statement: The lenders want to know how you manage the cash inflow. It will want to see your business bank statements and annual profit and loss statements to ensure that your business has a provision of enough funds for loan payments.
- Be honest and through
Review your loan application thoroughly. Be fair and accurate about each information that you provide to the lender. Your honesty and accuracy will make a positive impact on the lender’s decision regarding your loan approval.
If you are fulfilling all the business loan eligibility criteria and are applying for a loan with all necessary documentation, your application will get easy acceptance and approval.