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 > Common Hurdles to Tackle While Availing Business Loan

Loan for Business

Common Hurdles to Tackle While Availing Business Loan

Common Hurdles to Tackle While Availing Business Loan

Getting a loan for your business can feel like a mammoth task. But when you finally get your hands on the much-needed funds, you can hire new employees, get the machine repairs done, or purchase new equipment to keep the business operations running smoothly. 

However, obtaining business credit isn't simply a walk in the park. The process may involve a few roadblocks, but nothing you can't navigate with a bit of guidance.

Let's look at some common obstacles you may come across when availing of business finance.

1. Inability to meet collateral requirements

Business credit is usually secured, so most lenders will require you to pledge collateral against the loan amount. This is one of the most troublesome yet common business loan hurdles, especially for SMBs (small and midsize businesses), as they usually don't have any securities to pledge. 

In such a case, it's best to find a lender who provides collateral-free business finance options like Tata Capital. That way, you can obtain the required funds without putting your personal or professional assets on the line.

2. Not having a suitable credit score

As you may know, your business's credit score is one of the most important business loan eligibilitycriteria lenders check to determine your repayment capacity. Hence, without a good CIBIL score of 700 or above, the lender might turn down your loan application. This issue is quite common amongst SMBs and startups, as they have little to no credit history.

Now, while you can't build a good credit score overnight, you can do this: Craft an organised business plan to convince the lender you can service the repayment terms comfortably. At the same time, keep your focus on improving your credit score.

Additional Read: Tips to Improve your Credit Score to Get Business Loan

3. Erratic cash flow

Lenders usually favour business loan applicants with a consistent cash flow. Because your cash flow is essentially a snapshot of your business health, most lenders view insufficient cash cycles or erratic revenue streams poorly.

So, try to optimise your cash flow before applying for business credit. Also, keep your financial records, including balance sheet, income statements, etc., duly audited and updated to maintain a spotless financial profile.

Alternatively, you can approach an NBFC for a pre-approved loan, which is unsecured and only requires a decent credit score.

4. Existing debt

If you’re already servicing a debt, lenders may not review your loan application favourably. This is a pretty common scenario for any business with pre-existing loans, as it indicates a high debt-to-income (DTI) ratio – a comparison of your total monthly debts (like business credit card bills) and your total monthly income.

While there's no perfect DTI ratio, the lower it is, the better. You can ensure this by paying back your existing debt timely. It'll also help you build your credit score, which translates to higher loan eligibility.

Additional Read: Best Ways to Repay Your Business Loan Faster

Get hassle-free loans, only at Tata Capital

Want to avoid these hurdles and quickly get a loan for your business requirements? Opt for business finance from Tata Capital. We provide collateral-free loans, competitive business loan interest rates, and minimal documentation for maximum convenience.

You can also use our business loan EMI calculator to accurately check your potential EMI amounts.

Leave a Reply

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