Are you borrowing a business loan for the first time? Then, you might be wondering if you need to make a small business loan down payment, among other requirements.The answer is simply no!

When taking a loan for business, you don’t need to pay a down payment upfront. But some lenders might need you to pledge collateral, either a business or personal asset, if you’re opting for a secured term loan. In the case of unsecured loans, however, there’s no need for one. Your business credit score and financial statements are usually enough.

If so, then what are the factors affecting your loan? Let’s explore in detail below.

Factors affecting a business loan

There are several factors that can affect the terms of your business loan. Some of them are listed below.

1. Credit score

Just like any other type of loan, your credit score is evaluated when you apply for a business loan as well. It is an indicator of your creditworthiness, after all. Thus, a critical business loan eligibility criterion.

Usually, a credit score of 750 and above is considered good, as it indicates a higher capacity for managing debt. This, in turn, improves your chances of approval and helps you obtain funds at desirable terms.

Additional Read – All You Need to Know About Business Loan Repayments

2. Business cash flow

Before agreeing on a business loan amount, lenders want to know whether you have the capacity to manage the funds well. Especially if you have too many accounts to close monthly. To assess the same, lenders will check your business financials and cash flow. And, if everything seems optimistic, they are more likely to say “yes” to your loan application.

Moreover, if you can demonstrate that you’re a profit-making business, you may also get a competitive business loan interest rate.

3. Business plan

Your business plan is another vital factor affecting your business loan application. After all, it provides the lender with a detailed outline of your business goals, strategies, financial forecast, and analysis. This helps the lender determine the business’ financial stability and repayment capability. Not to mention, if your plan points towards a positive future, your approval chances go up naturally.

4. Type of business

Different types of businesses carry different kinds of financial risks. Most financial institutions will assess your creditworthiness depending on whether you’re a profit-making company or not. Apart from that, they will also evaluate your:

  • Business history
  • Repayment track record
  • Time in business
  • Nature of business

And, based on the evaluations, make a loan offer.

Additional Read – What is a Pre-Approved Business Loan?

The bottom line

Every business needs a reliable financial partner to kick start its journey or sustain it. If you’re searching for a business loan, down payment assistanceor collateral won’t pose a problem with Tata Capital! We offer collateral-free loans at competitive interest rates.We also have a simple application process and require minimal documentation to get started.

So, don’t wait. Check your potential EMIs using our business loan EMI calculator and applywith us today!

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