7 Common Business Loan Mistakes Committed by Business Owners
Entrepreneurship sounds like a great idea. The responsibilities associated with entrepreneurship are beyond imagination. If one is into a family business and has a good financial backing then being a business owner can be a dream-come-true. A steady fund flow helps to keep the business on track. But, a majority of the businesses run with the backing of Business Loans. The details involved in Applying for Business Loan can be complicated to understand and, in the bargain, one ends up making several mistakes while applying for a business loan.
Some of the common mistakes are:
1. Waiting too long to avail a loan
Most businesses are dependent on the constant flow of funds to prosper. The initial capital infused may keep the business going for some time. Soon one will face the cash crunch and would wonder how to manage the situation. You should not wait for such a situation to decide on applying for a Business Loan.
The procedure involved in getting a Business Loan sanctioned is very lengthy. Banks do very careful verification before deciding to finance a business. The whole process would take at least 30 days, and that could be the time when you should be making a lot of sales (had the funds been available!). So, if you are in need of immediate cash to bring the business on track, a business loan will not be the immediate option. You need to plan ahead for business finance in the very beginning.
2. Not having a business plan
A business plan is required to convince the bank about one’s knowledge and skill to run the business. The business plan should have detailed information about the line of business, the product involved, marketing strategies, the requirement of funds and the purpose of the loan. The loan amount required and how the money will be utilised and the strategy implemented to generate additional income with the investment should also be a part of the business plan. Lenders will be ensured about the seriousness of the applicant in working towards the development of the business on going through a business plan.
3. Not having the financial statements ready
A minimum of two years of financial statements along with projections for the coming years is indicative of how the business has been managed in the past and what is the vision to take the business to greater heights. Banks get an idea about the additional income generation on utilising the Business Loan only with a proper financial statement. Keep the financial statements ready before approaching a bank for a loan which is very much required for a go ahead from the bank.
4. Not knowing your credit score
Managing personal finance is as important as managing business finance. One should know about personal credit history and if there is any hitch there, understand the reason and set it right before approaching the bank. If one is not able to manage personal finance how will the bank be convinced that the loan provided will be utilised for the growth in the business. Financial discipline is an essential factor to assess one ‘s prosperity in business.
5. Choosing a convenient lender
We would not say that it is wrong to approach a bank with whom one has had a long-standing relationship. Loyalty is commendable, but the prudence lies in shopping around to get the best deal if one is running a business. The constant demand for Business Loan has given rise to a lot of players in the market. Competitive rates are offered. One needs to do a bit of research on interest rates and other associated charges to choose the best deal which would reduce the cost of the loan.
6. Choosing the right loan and investigating all loan options
With a variety of Business Loan schemes available in the market, there may be a tailormade loan scheme for every type of business. One needs to understand the right kind of loan to choose. The loan could be for the purchase of equipment or working capital. The choice of a wrong type of loan may reduce one’s chance for qualifying for the loan or it may be given with conditions that do not suit his or her needs. It is necessary to learn about the varieties of loans before applying for the Business Loan.
In the present scenario, there are various loan options beyond traditional bank loans. If for some reason(s), your proposal is declined by a lender, you should not be disappointed. There are other alternatives available in the market. Look for a favourable option and avail the loan from the right lender instead.
7. Submitting the right documents
The list of documents required for a Business Loan is an extensive one. Obtaining a checklist of documents required for the loan and providing the same at one go along with the loan application will speed up the loan processing, and the funds will be available as fast as possible.
After shopping around extensively to find the right option one may find that RBL Bank Business Loan or Aditya Birla Business Loan is the best suited for one’s line of business. One can apply for RBL Bank Business Loan or Aditya Birla Business Loan online through their official website or can contact their customer care for guidance.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
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