Top 6 Tips for Getting Business Loan

Starting a business or expanding one is quite a tedious activity. It can be confusing, tiring and mind-boggling throughout if done without a plan. Finance is one of the major factors that can make or break your business establishment and goals. Not having enough finance to help your working Capital needs can be destructive.

This is where a Business loan comes into the picture. They can give the right financial help to make your business grow. However, getting a business loan is not as easy as it seems. Many think that the loan just needs some documents and a Bank, it’s not true. Careful calculation and planning go into getting a business loan.

Here are a few tips to get a business loan in no time.

1. Create a Plan

Before applying for a business loan, create a detailed plan. This will include what you want from your business and how do you plan to use the cash. For instance- if you are planning to start a business to sell electronics, make a list of the electronic items you wish to sell. Breakdown the various anticipated costs and Return on Investment.

Furthermore, make a list with a time frame for repayment of the loan. This will help you in understanding the risks involved and what you can expect.

2. Look for Business Loans

The right bank is a must! Every bank may have a different repayment period and the rate of interest. It is important to conduct the necessary research and read their terms and conditions before applying. This will help you in finding the best loan that is suited for your business needs.

Here are some of the top banks that offer Business loans with affordable rates of interest:

Note: Interest rates are also subject to bank’s decisions based on the assessment of business, financials, loan amount and tenure of repayment by the applicant.

3. Have a Good Credit Score

While applying for a business loan, go check your Credit Score. Ideally, a credit score is a three-digit number that represents your creditworthiness, which truly impacts your business loan application.

Remember that the bank is lending you money and they would need to know whether you are reliable or not. Having a Good Credit score helps you gain a great standing with the lender. This can really put you in the frontline of getting the loan sanctioned in no time.

Your credit score is influenced by your payment history, credit utilisation rate, number of accounts, history of credit used, etc. Credit score could be both at a personal and business level. If you are planning to set up a new business, then a good personal credit score is a must. There are majorly 4 Credit Bureaus in India, and each of them has its own credit scoring model. Typically, the score ranges between 300 and 850. A higher score represents that you’re a responsible borrower. This gives you higher chances of favourable credit terms and quick loan approval.

Here’s the Credit Score Ranges:

• 300-500: Poor

• 500-650: Fair

• 650-750: Good

• 750+: Excellent

If you are planning to get a loan for an already established business, it is important that you have a good business credit score. If you need financing with infrastructure, equipment, etc., it is important that you have a good credit score.

If you have an unhealthy credit score at the moment, take some time out and start improving it. Payback your debts and stop borrowing too much.

4. Be Document Ready

Banks and other financial institutions require quite a lot of documents when it comes to business loans. There may be a requirement of an additional set of documents for the sanctioning of the loan.

Documents like financial accounts of the previous three years, business certificates, ownership proof, Collateral, etc., may be required. However, this requirement differs from bank to bank. It is important to be ready with all the documents before the application. It will save you time and energy.

5. Get Professional Help

If creating a successful business loan plan seems too painful, don’t worry. You can always get professional help. If you are planning to get a business loan for starting off a business, then you could always hire an Accountant or a finance manager to help you with the planning.

If you have a well-established business, you could plan on adding a finance manager to your board of directors to help with detailed guidance. It is important to have people with immense knowledge about the subject to review your plan so that any weakness can be fixed beforehand.

6. Borrow Sufficient Money

One of the major benefits of creating a business loan plan is that you will know the money required. You would now have a breakdown of all your expenses and needs. With this, you could apply for enough money to help you get up and running.

Failing to have a business loan plan can lead to a disaster. You would not have an estimate of how much money you require. This may lead to the need for applying for additional loans which are time consuming, tedious and expensive.

Conclusion

Business loans are a boon to the business world today. Many businesses are successful because they were able to finance their needs on time. If you are looking for a business loan, make sure to follow the tips mentioned in the article as a starting point for a successful business.