Top 6 Tips to Improve Your Odds of Getting a Small Business Loan in 2019
Entrepreneurs require substantial capital to establish a start-up. Even when a business takes off and begins to grow, it needs extra funds to enhance its operations. There are a lot of financing options that can help entrepreneurs avail the required capital for business expansion. One of the most popular funding options is a small business loan. Business loans help Small and Medium Enterprise
(SMEs) to grow and flourish. With the increase in the number of financial institutions and online lenders in recent times, availing a business loan has become comparatively easy. Although business loans are easily available, most financial institutions have stringent eligibility criteria for the same.
Hence, if you are an entrepreneur looking forward to availing a business loan, you should take care of the following aspects in order to boost your chances of loan approval.
A well-crafted business plan
Before applying for a business loan, it is always important to plan your business strategy well in advance. Banks and other Non-Banking Financial Company (NBFC) assess your repayment capacity before approving your loan application. As the repayment is totally dependent on the cash flow in your business, a well-crafted business plan can boost the chances of your loan approval. Your business plan should include the following aspects:
- Inventory purchase
- Your client’s payments
- Salary to staff
- Your Funds
- Future plans
Banks and other NBFCs check your credit score when you apply for a business loan. A high credit score makes you eligible for a higher loan amount at a reduced rate of interest. On the other hand, a low credit score hampers the chances of your loan approval. This is because a poor credit history indicates that you were not good with repayment of your previous loans. Bad repayment history makes you a high-risk applicant and thus, lenders hesitate while approving your business loan. Therefore it is essential that you improve your credit score before applying for a business loan.
Lack of organization and planning shows that you’re unprepared and hence affects the chances of your loan approval. Therefore, it is essential that you should be well-prepared with every possible piece of information or documentation that your lender could ask for.
While applying for a business loan, you should compare various loan offers by different financial institutions. This will allow you to settle for a loan that best suits your needs. You should also research the financial institution you are opting for and go through its reviews before applying for a business loan.
Have your documents ready
Lenders may ask you to provide several years of business tax returns, your business license, and your bank account statement along with several other documents. In order to get your loan approved, be ready with all these documents beforehand.
Know the purpose behind availing the loan
Loan-providers may ask you the reason behind availing the business loan. A satisfactory and clear response may increase the chances of your loan approval.
Now that you are well-aware of tips for a small business loan, ensure that you make the most of it and boost your chances of loan approval.