Capital is an essential thing that every business needs for the smooth running of its operations. But sometimes, we do not have the required funds to put in our business. In such cases, it is feasible to invest in a small business loan to start and grow your business or meet the day-to-day expenses.
A small business loan is a loan specifically designed for business owners looking for some finance to kick-start their entrepreneurial dreams. Also, various business loans for women are extended by various non-banking financial institutions to help women achieve their business goals.
In India, small and medium businesses play a significant role in boosting the GDP of the country. Thus, to achieve this, many lending institutions are offering easy-to-apply small business loans to people.
If you are looking to apply for a small business loan, follow these five easy steps to level up your odds of receiving the funds that your business needs to succeed.
1. Fix your credit score
The credit score forms a major part in the approval or rejection of your loan application. Lenders usually have some guidelines for sanctioning a business loan, and checking the credit history is the most essential amongst all. A solid credit score above 700 gives a good impression to the lender and can improve your loan approval chances. Contrary to this, a poor score can decrease your possibilities of acquiring a loan at nominal business loan interest rates. So, before you select a small business loan, improve your score by clearing all previous debts and avoid late payments in the future. Further, monitor your credit report frequently for any errors or missed payments.
2. Find the right lender
After reviewing your credit summary, it is time to choose an appropriate lender according to your business needs. There are multiple of non-banking financial institutions that provide small business loans at different interest rates. Choosing the right lending institution can either make or break your chances of getting a business loan at attractive rates.
So, make sure to search for the lender that has a good reputation and has a hassle-free business loan eligibility criterion. Further, compare the loan terms and conditions, repayment options, interest rates, loan tenure, prepayment charges, hidden fees, etc. offered by the particular lending institution. Once you short-list the suitable lender, you can share your financial information and other essential documents to move to the next step.
3. Determine how much you need
The third step is to assess how much money you want to borrow to cover your expenses. This amount also depends on your business needs as well as your budget, i.e., how much money you can spend on paying monthly interest. Determining the exact loan amount in advance shows the lender that you have done the research and deserve a loan. So, make sure to cover all the costs related to your business while deciding the loan amount.
4. Gather all the necessary documents
Next step to avail a business loan is to keep all your necessary documents in order. So, ensure you gather all the documents as mentioned by the short-listed lender. Lenders need to see these documents to get an idea of your financial history and your ability to reimburse the loan amount on time. The most common documents include:
- Business and personal income tax returns
- Cash flow statements
- Bank statements
- Balance sheet, income and profit loss statement for the last two years
- Commercial licenses
- Business financial statements
- Proof of ownership and continuation
- Identity and address proof
The documents may vary depending on the lender. Hence, it is essential to ask the lenders beforehand as to what documents are needed so that you can produce the same on demand.
5. Fill out a business loan application
Once the lender is selected and all the documents are gathered, it is time to start filling out your loan application. Now, you can fill out this application through the official website of the lender and submit all the documents. Or you can visit the branch and ask the concerned person to help you with the same.
After receiving your request, the lender will assess your application and carry out a background check to verify all your information and documents. If everything seems satisfactory, you may receive the loan money directly in your bank account within a couple of days.