What does it really take to get a small business loan?
It’s easy to apply for small business loan when you are prepared. Regardless of whether you have applied for a bank loan or NBFC business loan, you need to know the lender’s requirements. Knowing your lender’s requirements in advance will save you time and frustration.
The credit score ranges from 300 to 900 and helps the lender assess your ability to repay the loan amount.
Scoring is most often based on your payment history, the amount you have on other loans and credit cards, the types of loans currently available, the duration of your loan usage, and the number of recent credit inquiries.
A credit score is an important criterion for lenders looking to see how the borrower manages their debt. Paying all your bills on time plays a key role in building your results. Any person can get free credit reports once a year.
The applicant may exercise the same entitlement and check that no incorrect information has been entered. Can improve information to witness an immediate jump in reports.
Find out about the eligibility criteria for business loans
Meeting the minimum qualifications of the lender will make the application strong. Some lenders may offer flexibility if an applicant performs poorly in one area but performs better in another. Nevertheless, it is better to meet all the requirements or exceed all the lender’s minimums.
Online borrowers generally have minimum criteria in terms of CIBIL score, years of operation, complex ITR, and annual revenue. But all lenders generally stay away from business owners who have had bankruptcy records in the past.
If an applicant is applying for a bank loan, additional credit requirements must be met. Banks generally have stringent eligibility criteria which sometimes make it difficult for applicants to approve their application.
Typically, lenders require a lot of business and income credit score for a business loan. In addition, the borrower should not have incurred any obligations in the past.
That said, it is easier to qualify for online loans. Online lenders have simple eligibility criteria and less stringent requirements.
They are also ready to grant loans to start-ups for two years of business activity. . In addition, online loans are also offered at very competitive interest rates.
Collect the required documents
Banks and other financial lenders usually ask for multiple documents in order to process your loan application. These documents may include:
Income tax declarations – personal and business
AoA and MoA
All of these requirements can make getting a business loan a time consuming task. This may not be a problem if NBFC business loan is available. Besides, if there is a need for faster money, online lenders are best suited. They have a streamlined online application process and require fewer paperwork.
Development of a business plan
All lenders want to know how to use the money and how profits will be generated to pay back the amount borrowed. They require a strong business plan that not only details the vision and goals of the organization, but also how the business is to increase profits.
The business plan should also include current and projected financial data and show the company’s cash flow to cover the ongoing working capital requirements. This will give the lender confidence in the business and increase the chances of your loan being approved.
The business plan should include:
Product and service description
Promotional, marketing and sales strategy
To qualify for a business loan, the applicant must provide collateral to cover the loan amount. Collateral is essentially an asset with some monetary value such as real estate, inventory, etc. Basically, a lender can sell assets to recoup its losses in the event of a default.
With that said, NBFCs do not require security; they offer an unsecured business loan.
So if you take care of all these points, you can apply for a small business loan without difficulty.