7 Steps to Obtain a Business Loan Easily

7 Steps to Obtain a Business Loan Easily

Availing of a Business Loan is not a cakewalk, especially for small & medium sized businesses. Indeed it may take a lot of time and effort in procuring a Business Loan which could be emotionally as well as financially draining. However, if you proceed systematically and carefully you can save yourself from this undesirable stress.

So, let’s outline below 7 major steps to avail of hassle free business loan.

1. Follow some pre-steps

Before you contact a lender for business loan you should take some pre steps. If it is a Start Up or a small business unit, it is necessary to build your profile. You should have a cordial relationship with your bank, build your business credit score and keep all income documents such as ITR, Balance sheet and P& L a/c handy. For instance, a business that has a dynamic presence in the market via press coverage, social media presence or positive reviews, tend to be more trustworthy for a lender. Thus you must take the required time before you Apply for a Business Loan. It is advisable to use professional advice to ease the process.

2. Clearly know why your business needs money

Get a clear picture of why does your business need money? The reasons could be many such as purchasing equipment or other necessary items, funding long term growth, buying real estate or software development and growth acquisitions, and so on. There could also some miscellaneous reasons to obtain money like covering up for your monthly losses, financing urgent working capital requirements during non-performance times, acquiring non-related business assets and, so on. Knowing the exact purpose for the loan helps you to navigate the flow of funds and save the wasteful expenses.


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3. Also, know how much amount does the business need?

Know how much loan amount your business actually need? Calculate the exact requirement so that it may not lead to surplus or shortage of money later on. Getting lesser than required loan amount would lead to a severe working capital crunch, whereas, a surplus loan amount may lead to wastage and debt burden.

To protect your business from such situations, a well researched and planned budget would to your rescue. Making a budget also helps you have a cash flow prospective which would further help you answer questions of the lender. It will show that you have already done research before applying for a business loan.


Also Read: COVID 19 Personal Loan in India


4. Know your credit score

Your credit score as a business owner is the most crucial thing for the lenders to look for before sanctioning you the Business Loan. Your credit score shows your repayment capacity and reliability for repayment commitments.

A good credit score gains a lender’s trust on business for regular loan repayments. Shared below is the list of some key points you should keep in mind in this regards:

A credit score above 750 is an ideal score that the lender expects but that does not guarantee the approval of a loan application.

The age of the business matters. A lender would be willing to offer you working capital and terms loans for business if the age of the enterprise is more than 2 years. Besides the financials should have a documented record of incoming accounts receivables.

Research and figure out how your industry is ranked with respect to industry risk reports. Industry risk is dependent on Government SIC codes.

If your business is running on a higher operating cash margin, the chances will be higher for your business to sustain when the markets are slow and unfavourable. Many lenders extend funding subject to the cash flow of your company as it is a barometer for measuring the loan repayment capacity of your company.

5. Identify the appropriate loan lender

There are plenty of options available such as Bajaj Finserv, HDFC, SBI Business Loan etc. Do thorough research of each lender before you finalise the one for your business. Weigh the pros and cons before zeroing in on the financial institution. Study carefully about their eligibility criteria, terms and conditions and choose the benefits that support your business to get the right amount of funds. Here again an online loans marketplace can help you compare the lenders and choose the suitable offer.

To ease the loan comparison, we are sharing below Business Loan Interest Rates for various lenders.

Bank / NBFC Interest Rate

SBI Business Loan

10.75% p.a.

HDFC Business Loan

11.90% to 21.35% p.a.

ICICI Bank Business Loan

For secured facilities: Up to Repo Rate +6.0 %(Non PSL)

For facilities backed by CGTMSE: Up to Repo Rate + 7.10%

Axis Bank Business Loan

14.25%-18% p.a.

Bajaj Finserv Business Loan

18% p.a. onwards

With above comparison you can see HDFC Business Loan is bit expensive than SBI Loan, yet there are an array of other benefits which you would enjoy with the private lender. So, it is important to conduct a thorough comparison of the available options.

6. Carefully plan your business loan application

Your business loan application is a passport to source the required loan amount for expanding and sustaining your operations. You need to prepare the business loan application in the right way to make your lender agree for the required loan amount for the business need. Your loan application should include your profile as the business owner, business documents, the business plan, the financial statements of your business such as profit & loss account, cash flow statements, balance sheet and personal financial information of the owner such as tax returns for three years. Keep these things documented in sequential order for your lender to investigate. It will save ample time and certainly bring you a swifter nod for your business loan proposal.

7. Time and patience reap rewards

Once your business loan proposal is investigated, your lender takes at least 2-4 weeks to answer on the loan application. Check every week with your lender for an update on your application. Ask whether any additional documentation is required to suffice your loan application. Be ready to provide the same without any delays that would allow the lender to give consent of approval on your loan application in time.

Also Read: Looking for a Quick Business Loan? 5 Options for Same Day Cash!

To apply online for Home LoanPersonal Loan, Credit Card, Business Loan & LAP visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 4 million+ happy customers since 1989.


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Category: Business Loan