Get the Tata Capital App to apply for Loans & manage your account. Download Now


Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required

Tata Capital > Blog > Loan for Business > 5 Simple Ways to Improve Your Chances of Getting a Small Business Loan

Loan for Business

5 Simple Ways to Improve Your Chances of Getting a Small Business Loan

5 Simple Ways to Improve Your Chances of Getting a Small Business Loan

Establishing a small or medium-sized business can be challenging because of the financial burden associated with set-up, expansion, and initial operations. To aid the process of generating SME working capital, many banks and financial institutions give out small-medium enterprise loans.

If you are looking to apply for a small business loan, you must have a sound business or expenditure plan in mind. Besides these, you will also have to present detailed credit records to your lender. Here are some tips you can follow to strengthen your small-medium enterprise loan application and improve your chances of loan approval.

1. Robust Business Plan

Before you apply for a small business loan, you need to have a proper business plan outlining your ideas and plans. Ideally, your business plan must be conscious of the socio-economic conditions surrounding your industry. It should also address all the regulations put in place by the government and must show potential to your lenders. Your business plan should also document how you plan to spend the loaned amount and why you need it in the first place. A well-thought-out business plan addressing financial projection and accurate market analysis will have a better chance at SME business loan approval.

2. Efficient Management of Cash Flow

Every financial institution that gives you an SME business loan will analyse your ability to repay it before approval. The liquidity position of your business must be stable for a lender to consider your application for an MSME loan. Before approaching a lender, study your liquidity and the ratio of cash you have available for repayment. To improve your liquidity, try to eliminate all unnecessary expenditure and enforce better cash management discipline.

3. Well-Sorted Documentation

While applying for an SME loan, you will need all the legal and tax documents related to your business. Often, such paperwork might not be sorted clearly. You might even forget to include some essential documents. Both of these can lead to rejection from your lender.

To prepare for an SME business loan application, keep your GST, income tax, credit-related, and registration documents in order. If there are any legal loopholes in your business papers, get them resolved before applying for an SME term loan.

Additional Read:- 5 Things You Can Fix With a Small Business Loan

4. Better Credit Score

Your business’ credit score is an indication of its ability to manage the debt repayment. Regardless of the bank or financial institution you choose, you will need a good credit score to secure an MSME loan. You can seek a credit score from agencies like CRISIL or ICRA.

To improve your credit history, maintain a credit utilisation ratio of about 25%. You should also ensure timely debt repayment and resolution of outstanding debt on your business.

5. Timely Payment of Fees

For a good chance at loan approval, pay all the fees associated with the application in a timely fashion. Also, keep an account of all the extra expenses and penalties, and make sure you set aside some amount to pay those.

The best lender for a quick and hassle-free SME loan is Tata Capital. Our “MSME loan apply online” page contains all the details related to eligibility and documentation. The interest rates for our small business loans start at 19%, while their repayment tenure is flexible.

Additional Read:- Can You, a Small Business Owner, Take a Business Loan?

For a quick approval of your MSME loan, apply online using our website or reach out to our representatives.

Leave a Reply

Your email address will not be published. Required fields are marked *