Top 7 Questions a Business Loan Provider May Ask You

Capital is the primary requirement to build a business. The initial capital to start the business in most of the cases is invariably brought in by the business owner. But as the business progresses, there will be a need for additional capital to keep the business stable. Additional funds may be required to run the day-to-day operations, to build inventory or to add new equipment. In either of the case, you need to look for a business loan provider for the required funds. However, you may also need to meet the strict business standards of the business loan provider.

After having submitted the pile of documents required by the Business Loan Provider, you are required to face a one-on-one interview. The lender may want to know certain aspects of your business before taking a decision.

Interviews are generally held to ensure that the candidate is worthy of the money and what he or she is looking for suits their business plan. In the interview, you should make sure that the lender is convinced about the stability of your business, the cash flow of the business in the past years and the value of the collateral that will be offered. This is to prove that come what may the loan availed will be repaid promptly.

It is better to be prepared for some compulsory questions that will be asked by the business loan provider in the course of the interview instead of being caught off-guard. A list of common questions is shared below, to help you prepare for the interview with the lender.

1. About business plan

This is the basic question asked by any business loan lender. This is to understand the utilisation of the borrowed funds. The funds used in the right direction will result in generating profits in the business. The lender wants to ensure whether the cash flow will improve on making further investments in the business. Cash flow is the main component that will ensure payment of loan instalments promptly.

2. Quantum of loan required and why?

The need for the funds depends on how established the business is. If it is a start-up, then the loan is generally required to get the business started. If an established unit, then funds may be required as working capital for operational expenses, or to invest in new equipment, to have some backup funds or to build a good credit history.

It is good to assess the requirement of funds before approaching the Business Loan provider. Justifying the estimate for the loan required proves the maturity of the business owner. The question about loan requirement should be answered with great care. You should be able to show the break-up of usage of Business Loan at every stage of the business. The lender will consider it as a positive point if convinced about the estimate projected.

3. Question about personal credit history

Personal credit history is a scale to prove one’s financial discipline. It will give information about all Personal Loans like Home Loan, Car Loan, Credit Cards, etc. If all the past dues are paid in time and the credit card limit is also used judiciously, the credit score will always be good and will convince the lender about one’s judicial financial management.

If the business is a joint venture, the credit score of all the associates is required. Before facing the interview, it is essential to be aware of each associate’s personal credit history. Business loan providers are normally skeptical about the repayment, and good personal credit history will wipe out this doubt.

4. About collaterals being offered

Chances of mitigation of risks that arise out of non-payment of Online Business Loan is gauged by the value and nature of collateral offered for the proposed loan. You can borrow up to 70% to 80% of the value of the collateral as a business loan. So, the quantum of the loan provided depends on the value of the collateral offered. The collateral offered should be presented in such a way that the lender is assured of recovering the entire loan amount in case of any eventuality.

5. Ability of business to repay the loan

Repayment of the business loan is the primary concern of any lender. A constant reassurance about the potential of one’s business is required. Even if one has submitted the past records about the performance of the business, this question is bound to arise since the lender wants to understand the potential and stability of one’s business in the near future.

6. Where does the business stand in terms of the present Market

This question is posed mainly to understand if one is well versed in the business. One should talk about the uniqueness of the business model and the product and how it fits the present market.

7. What is the repayment tenure required?

If one has to gain the confidence of the lender, a realistic explanation with facts and figures should be given to justify the term chosen. You may want a short loan. The lender should not feel that only to impress them about the repayment capacity you have chosen the small tenure. The decision should be backed by proper numbers and research.

Being confident in oneself and having good knowledge about one’s business is the key to get through a business loan interview. Go prepared with relevant documents and back almost all the answers with a supporting document. Have a picture presentation of the business product and services to substantiate what is said. One should be equipped with answers to all questions related to the business. This will enable to gain trust of the loan provider. Once the trust is built nothing can stop the approval of your business loan proposal.

HDFC Bank and Deutsche Bank are the two major business loan providers in the market. One can apply for HDFC bank business loan or Deutsche Bank Business Loan online or by visiting the nearest branch.