At the outset, business credit may appear tricky, especially to first-time borrowers. But, believe it or not, availing of business financeis fairly uncomplicated. Here are the bare bones of the approval process:
Step I: To avail of a business loan, apply with a lender of your preference. And furnish the required documents when asked.
Step II: Next, the lender will verify the furnished documents to validate your claims. They may hold a personal discussion to understand your circumstance better. The meeting may involve negotiation for the repayment terms.
Step III: Finally, once the document verification process is successful, lenders approve the loan. They prepare a loan agreement for the borrower to sign. After that, they disburse the loan amountin a bank account.
Additional Read: Step by Step Business Loan Application Process Explained
Worried you may face disapproval? Be wary of the following pointers to sign a favourable business loan agreement fast.
#1 Ready a business plan
Lenders will assess your financial health to determine creditworthiness. For a favourable evaluation, ready a business plan to demonstrate a steady cash flow. Include complete details about your business objectives, annual turnover, credit history, among others. Even better, use a business loan EMI calculator to roughly estimate a loan amount to match your repayment capacity. Also, provide details about how you intend to spend the borrowed capital.
#2 Organise the required documents
For smooth sail through the verification process, prepare the documents in advance – from business KYC papers to audited bank statements. Most lenders provide a document checklist you can refer to. Make sure all the documents are duly audited, if necessary. But remember, paperwork will differ for different lenders.
#3 Maintain a healthy credit score
Lenders typically determine your business loan eligibilitybased on your business credit score. They will not only check your current financial health but your business’ financial history as well. Make sure your credit score is above 700, which is healthy and demonstrates a high repayment capacity. But in case your score is low, it is better to raise it before you apply for a loan.
#4 Be transparent
To ensure that the odds of business loan approval are in your favour, keep your credit history black and white. Provide ample information about your cash flow and business objectives. Lenders like to know your business inside out before they say yes. Therefore, if you maintain financial transparency, you may have better chances at approval.
More importantly, while lenders are laxer with restrictions today, loan approval will be easier if you remember to:
- Choose a type of business loan, which befits your unique business needs.
- Update your old financial records. Make sure your business credit history is clean without any errors.
- Be thorough with documentation and upfront with your financial health to demonstrate reliability.
- Use a business loan calculator to estimate a loan amount suitable to meet your commercial requirements before you apply.
Additional Read: Things everyone must know about a Business loan Agreement
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