Know About the Cs of Qualifying for Small Business Loans |
Posted: June 26, 2018 |
Starting a new business or expanding an existing one requires a strong financial base. It can be tough for you as an entrepreneur to save funds directed towards boosting your venture in the industry. That’s where small business loans come into the picture. Availing a small business development loan can be tricky at times. Lenders tend to provide loans at lower interest to businesses with ready cash flow, high return promises, and solid collateral base, although, businesses without such assets are the ones facing urgent requirements. There are a few factors a financial institution will look for before approving any type of Business Loan. Experts recommend maintaining at least a few of them to make you more preferable than the rest. Here are the top 5 C’s you should always maintain to avail that small business loan you needed. 1. Your Business Capital – To apply for a small business loan, you need to have at least some money to finance your project. No lender will provide you with the entire sum you require; typically, for new businesses, you will have to contribute at least 30% of your total expense, whereas, for an existing one, you will have to present at least 20% capital. Bajaj Finserv, a leading non banking financial institution, provides a special loan to boost an existing business. It is for the business owner who needs funds to keep up with the market demand or a sudden increase of customers. This Working Capital Loan is sanctioned quickly to cater to urgent needs and does not require any collateral. You might wonder “how do you get a small business loan when you don’t have any capital?” Well, in that case, you will need to find investments to cash out or need to find a business partner. A big mistake will be to show loan money as a capital investment. If any bank or NBFC finds about it, they will most likely deny your application.
2. Your Credit history – A lender will inspect your credit history whenever you apply for any types of loan. Many lenders predict your credit risk by calculating your credit score, credit history, and your recent history of credit utilisation. Make sure to take your time and effort in improve your credit score. Do your homework, try and meet the minimum score required, and you will be able to waive it off with ease. 3. Business Collateral – Any financial institution will want to provide a loan with a complete guarantee of repayment. They might not outright decline your application for inadequate collateral. However, the lending party will ask you to present at least some security against their small business loans. An alternative to this is companies providing unsecured loans. Lenders like Bajaj Finserv allow you to borrow up to Rs.30 lakh without presenting any collateral. This relieves you from worrying about asset liquidation. 4. Venture’s ROI Capacity – Return is an important part of any business; you have to generate cash flow to pay off your debts. Whenever you approach a lender with small Business Loans application, they will assess a projected income from your business. Your credibility depends on the evidence that you will be able to repay your loans. 5. Character – Another key factor no one should forget is your project’s approval rating. Lenders not only look at your client's review, but they also check if you have managed to maintain a profit and loss balance throughout the period. Also, your personal history might come into play. Acceptance of your small business loans application might be subjected to any previous convictions. Partnership in the business is another important factor. With an increase of small and medium businesses, today’s market is filled with financial institutions willing to lend.
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