You might have a great business expansion idea, but you will need more to make it a reality. Most importantly, you will need funds. You might invest your savings, borrow from friends, or approach investors to get the required funding, but getting a Business Loan from a reputable NBFC is one of the wisest options. However, before breaking out a suit and applying for a loan, you must get a few things to secure the best financial deal with Business Loan.
Instead of filling out an unprepared application form, improve your chances by setting realistic goals and finding a lending institution with the lowest Business Loan interest rate. To get the best loan deal, follow these tips to improve your chances.
Make a Plan
Have a plan before approaching a lending institution for a Business Loan. Although a business plan is not mandatory for unsecured SME loans, drafting one is essential to plan the loan application better. A pre-existing relationship with the loan company would be an extra advantage. Before filling out the application form, check your company's credit health report and ensure all financial records, like ITR, profit loss statements, balance sheets, etc., are up-to-date. Take time to apply for the loan rather than doing it in haste. Seek a customer representative's advice if required.
Have a Clear Reason for Borrowing a Loan
You may cover various expenses with a Small Business Loan, including expansion, hiring staff, acquiring other businesses, purchasing equipment, building working capital, investing in real estate, etc. Other reasons may also include handling business slowdowns, recovering from financial losses, acquiring business assets, etc. Therefore, determine the exact purpose of getting a loan to improve chances of approval and navigate the received funds in the correct direction.
Determine the Loan Amount
Avoid applying for a loan without evaluating the required expenses and determining the necessary amount. Calculating your exact financial need will improve your chances of approval with the best loan deal. Otherwise, you may face a financial crunch or be left with surplus funds later. Both situations are detrimental to your company's financial health. To avoid such a situation, create a well-planned budget before applying for a loan. Determining an adequate loan amount will give you a cash flow perspective that helps answer the lending institution's queries regarding financial utilisation.
Check the Business Credit Score
A company's credit history is one of the most important aspects lending institutions consider before approving a loan. It reflects your creditworthiness, reliability, and repayment capacity. A decent credit score will gain the lending institution's trust regarding the prompt repayment of the EMIs. Therefore, maintain a credit score above 700-750 to secure the best financial deal with a Business Loan. Moreover, the business's age also makes a difference. Lending institutions easily offer loans to businesses performing well in the market for over five years. Many loan companies also look at your business cash flow to measure your financial aspects and repayment capacity.
Pick an Appropriate Loan Provider
You will find hundreds of loan plans while looking for a Business Loan in India. Conduct thorough research and compare their loan schemes before finalising one. Carefully studying their Business Loan interest rate, repayment terms, loan features, etc., is paramount. Since India has a vast marketplace of online Business Loans, comparing the available loan plans is crucial to getting the most suitable financing deal for your requirements.
Opt for an Appropriate Loan Tenure
Business Loans are popular among small entrepreneurs due to their flexible repayment options. Business owners of all budgets can seek these loans and repay them conveniently without stressing their monthly finances. If you can afford it, opt for a shorter loan tenure with bigger EMIs to repay the loan sooner. However, if the finances are tight and you cannot afford a bigger EMI, opt for a longer tenure to keep the EMIs smaller. A Business Loan EMI calculator will calculate the loan EMIs for various loan terms, helping you select a tenure with easily affordable repayments.
Carefully Plan the Application
You must complete an online application form to obtain a Business Loan for your business expansion and other goals. Therefore, prepare the application so the loan company can approve the desired loan amount at a reasonable Business Loan interest rate. Apart from your business profile, documents, and plan, it should include your financial statements, personal information, etc. Moreover, the documentation should be maintained sequentially to make verification easier for the lending institutions.
Once you apply for a loan, the lending institution will take some time to investigate, verify the details and approve the application. These days, modern NBFCs use automated methods to approve applications and grant finances within minutes. If it takes longer, keep patience and use your reference number to check your loan status. You may also contact a customer representative for the same. If they contact you for additional information or documents, be prepared to provide them with what they want. Research and patience will convince the lending institutions and attract approval without further delays.
Improve Cash Flow
Although some lending institutions do not impose minimum turnover requirements to make Business Loans easily accessible, they check your financial records to determine your creditworthiness and repayment capacity. Improving your cash flow means increasing the funds moving in and out of your enterprise. Optimise pricing, increase sales, collect faster receivables, reduce costs, and pay slower payables to improve your company's cash flow. Doing that reduces risk, increases profitability, and enhances your negotiating power to get a better loan deal.
Getting the required funding with the lowest Business Loan interest rate and favourable terms and conditions can greatly affect your profitability, growth potential, and cash flow. Following these tips will project you as a reliable borrower before the lending institutions, convincing them to offer you a better loan deal than others. Since you will find various loan options in India, choose the best loan plan and prepare your application carefully to get the best financing deal with a Business Loan.