Capital is the prime necessity for a budding business and entrepreneurs. Even after a business takes off and starts to prosper, it requires extra financing to supplement its operations.
There are several funding and financing options available in the market that entrepreneurs can make use of to expand their business activity.
One such option that has gained popularity is a small business loan. These business loans help Small and Medium Enterprises (SMEs) to expand and flourish. With a substantial rise in the number of online lenders and other financial intermediaries, availing small business loans has become relatively easy.
Although there are many institutions ready to extend loans in your support, you should make a cautious and conscious choice of credible lenders. Untrustworthy lenders damage your confidence and divert the attention of your business.
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Hence it is important to choose from reliable online lenders like PaydayMe or traditional lenders like the Banks.
Popular online lenders have taken the business loans up the notch. Estimates of 2014 show that these online lenders have originated around $12 billion in small business loans alone. The unsecured consumer loans amounted to an estimated $7 billion while the small business loans accounted for around $5 billion.
Despite the huge number of institutions willing to approve business loans and the ease of obtaining one such loan, most of them have hard and fast rules defining the eligibility criteria for the same.
Thus, if you are looking forward to getting a business loan, here are some aspects you should take care of to enhance your chances of loan approval.
An Eloquent Business Plan
Crafting a business plan and strategy well in advance puts you at ease when you apply for a business loan. Banks and Non-Banking Financial Companies (NFBCs) evaluate your ability of repayment before they approve your loan application.
This ability entirely depends on the cash flow in your business; a well-crafted business strategy can increase your chances of loan approval.
Your business plan must incorporate the following details:
- Particulars of Inventory purchases
- Your client’s payments
- Salary to staff
- Your Funds
- Future plans
Good Credit Score
Keep in mind that NBFCs and other Banks check your credit score when they receive your application for a business loan. A good credit score makes it easier for you. With a higher credit score, you are eligible for higher loan amounts at lower rates of interest. Similarly, a bad credit score hinders the progress of your loan approval.
A low credit score is indicative of a poor repayment history of the previous loans and it makes you a high risk contender for the loan. Lenders tend to hesitate to approve your loan. Hence, it is vital to enhance your credit score prior to applying for a business loan.
Improper planning and lack of organizing indicates that you are underprepared. Therefore, it affects your chances of loan approval. It is important for you to be farsighted and prepare well in advance for any piece of information or question the lender might pose.
Do Your Research
When you apply for a business loan, compare various loan providers and their offers. This will clear confusion and help you settle for a loan and decide the financial institution that best suits your needs.
Also make sure to go research and go through the reviews of the institution you opted for before filling the application for a business loan.
Keep Your Documents Ready
Banks and NBFCs may ask you to provide required documentation for several years of tax returns, your business license along with your bank account statement and other documents. Keep these documents ready beforehand for a hassle free loan approval.
Know the Purpose Behind Availing the Loan
Lenders often ask the reason behind availing business loans. Be ready with a response that is clear about your goals and the needs of a loan. A satisfactory answer can drastically boost the chances of your loan approval.
So there you go! You have our top tips to improve your odds of getting a business loan. Business loan is an opportunity to make your dreams come true.
Therefore, it is important to take every caution to not delay your loan approval. We suggest you plan ahead, stay confident and use our tips to your advantage!