Searching for an ideal handbook to understand what lenders seek while deciding your business loan eligibility? Well, look no more.
Whether you’re a newly-opened business or a prominent one, a robust cash flow is always a top priority. However, off-season expenses or funding your working capital requires a quick infusion of cash. That’s where a business loan can lend a helping hand.
To ensure that your loan is approved in one go, you must know what lenders look for while sanctioning the funds. Here are the top factors they consider:
Clearly, having the right documents is critical. While the required paperwork varies, every business loan lender mandates specific documentation. Here’s a list of documents requested by Tata Capital:
- ID proof – passport, PAN card, driving license, Aadhaar, voters ID card
- Income proof – your last 6 month’s bank statement
- Address proof – telephone bill, ration card, lease agreement, sales tax certificate, electricity bill, etc.
- Business ownership proof – various compulsory documents like your memorandum’s certified true copy, business license, sole proprietorship declaration, etc.
- Financial paperwork – previous 2 years’ ITR, accompanied by the balance sheet, last 2 year’s profit, loss, and income statement, and business continuation proof
- Last 3 years’ audited financials
Additional Read: How to Speed up Business Loan Document Verification Process?
Healthy Credit History
Most lenders prefer to work with companies that display a robust CIBIL score. It assures them about the borrower’s creditworthiness and ability to repay. When it comes to business loan lender negotiation tips, most experts suggest having a high credit score of over 700. Since a satisfactory credit score proves your repayment discipline, it also gives you more room to negotiate. You can receive favourable financing terms, such as an affordable business loan interest rate.
Additional Read: Tips to Improve your Credit Score to Get Business Loan
Sufficient Cash Flow
A good cash flow is often the green signal most lenders look for. Healthy cash flow indicates that your daily business operations generate enough cash for you to repay the loan timely. Several financial institutions check the business’s and the owner’s bank statement to gain clarity about their income and monetary flow.
Appropriate Repayment Capacity
To assess your loan repayment capacity from your company’s income itself, lending institutions may also analyze your business’s free cash flow and debt-to-income ratio. Lenders consider these as a safety net if your business faces difficulties, assuring them that you can still repay.
From your end, you can also evaluate if the lender’s loan terms are preferable for you or not by using their business finance calculator. Simply enter your loan amount, tenure, and interest rate to determine the monthly instalment payable and assess if it’s viable for your business.
Choose a Friendly Lender for a Seamless Sanctioning
Tata Capital offers a hassle-free loan application process, including attractive features such as quicker documentation and competitive business loan interest rates.What’s more, our business finance offerings are tailored to fund your varying requirements. Avail of collateral-free business loans with flexible repayment options to scale your business effectively.
Reach us at our website to know more!