Applying For Business Loan? 4 Tips To Consider
Taking a business loan is an effective way, to keep the cash flow uninterrupted within your business. Entrepreneurs can comfortably meet a dire financial need for their business, with this type of loan. By availing money on credit, the liquidity of your funds remains intact. When the heavier expenses of your business are financed by a bank, individual or a financial institution, the liquid money can be directed towards managing other trivial expenses.
However, due to uncertain economic conditions, the criteria for business loan application is stricter. So, you may face some hurdles in getting a business loan approved. Here are some points to consider before applying for a business loan:
Conduct Your Own Research
There is no dearth of lenders or good loan plans in the market. Hence, be smart by researching and choosing the most suitable loan plan, as per your business requirement. If you have a small business, you can choose to borrow money from small business loan providers or start-up business loan providers (if you are a start-up company). Some lenders specialize in financing business as per its magnitude. Also, pick a loan plan which has a reasonable interest rate and does not involve unnecessarily heavy documentation.
Credit History-Personal and Business
As a rule, the credit history of all the principles in a company, who own more than 20% of the company, is reviewed. Hence, make sure you have a clean report. If your credit history reflects lingering debts or delayed payments, your loan request is unlikely to get a green signal. The bank or lender will also check the credit history of your business, so make sure you have cleared all your dues on time.
The best way to avoid this embarrassment is to keep track of all the payments, from beginning to end. If you feel manual tracking is hard, you can take help of many online resources. Accuracy of credit history is utmost important.
Monthly Income Generated By Your Business
The bank or lender needs to have an unwavering assurance, that the borrower is capable of repaying his/her loan amount. A crucial point to remember is that, before applying for a business loan, make sure your business is VAT registered. Also, loan providers review the amount of income which is generated by a business every month. Monthly turnover of your business will be reviewed by banks or lenders, to be sure of your capability to repay.
A Definite Collateral or Security
If you are planning to apply for a business loan, start thinking about a valuable asset, which you can pledge against the value of your loan. A house, business inventory, vehicle, equipment etc., can be used as collateral. This can be in the form of loan against property, loan against gold, loan against equipment etc. Your request will be declined, if there is no authentic security to back up your loan. The bank needs to be certain that the amount lent will be recovered by all means, if you fail to repay the loan.
However, due to uncertain economic conditions, the criteria for business loan application is stricter. So, you may face some hurdles in getting a business loan approved. Here are some points to consider before applying for a business loan:
Conduct Your Own Research
There is no dearth of lenders or good loan plans in the market. Hence, be smart by researching and choosing the most suitable loan plan, as per your business requirement. If you have a small business, you can choose to borrow money from small business loan providers or start-up business loan providers (if you are a start-up company). Some lenders specialize in financing business as per its magnitude. Also, pick a loan plan which has a reasonable interest rate and does not involve unnecessarily heavy documentation.
Credit History-Personal and Business
As a rule, the credit history of all the principles in a company, who own more than 20% of the company, is reviewed. Hence, make sure you have a clean report. If your credit history reflects lingering debts or delayed payments, your loan request is unlikely to get a green signal. The bank or lender will also check the credit history of your business, so make sure you have cleared all your dues on time.
The best way to avoid this embarrassment is to keep track of all the payments, from beginning to end. If you feel manual tracking is hard, you can take help of many online resources. Accuracy of credit history is utmost important.
Monthly Income Generated By Your Business
The bank or lender needs to have an unwavering assurance, that the borrower is capable of repaying his/her loan amount. A crucial point to remember is that, before applying for a business loan, make sure your business is VAT registered. Also, loan providers review the amount of income which is generated by a business every month. Monthly turnover of your business will be reviewed by banks or lenders, to be sure of your capability to repay.
A Definite Collateral or Security
If you are planning to apply for a business loan, start thinking about a valuable asset, which you can pledge against the value of your loan. A house, business inventory, vehicle, equipment etc., can be used as collateral. This can be in the form of loan against property, loan against gold, loan against equipment etc. Your request will be declined, if there is no authentic security to back up your loan. The bank needs to be certain that the amount lent will be recovered by all means, if you fail to repay the loan.
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