A business loan can be really
convenient for the self-employed as these can be used for several purposes
which include business expansion, meeting operational expenses, providing fresh
working capital, purchasing inventory, etc. However, getting a loan is quite
harder for the self-employed as compare to a salaried professional, as it
involves higher risks.
Let’s explore a list of factors to
keep in mind while applying for a business loan with Mehul Mathrani.
Prepare a good business plan
A well-framed business plan is
advisable as it will help you in convincing the lender to grant you the funds.
Your business plan should clearly define your project’s objective, marketing
and development strategies, revenue generation plans, etc. Since lenders
consider your revenue generation plans to analyze your business’ viability and
repayment capacity, so make sure you have a strong revenue model that explains
how you would be repaying the loan on time and your anticipated use of the
funds.
Be ready with documentation
Even if you have a perfect business
plan with well-explained goals, lack of proper documentation can lead to a
complete rejection of your business loan application. Before applying for the
loan, make sure that you carry all the required documents which the bank may
ask for. Documents needed to complete the process include last few years’ KYC
documents, entity’s proof, income tax returns, audit reports, bank statements,
etc.
Check your cash flows
Your businesses’ cash flow forecasts
play a great role in your business loan approval. A solid history of high
revenue generation increases the company’s chances of getting the loan
approved. In case your business has a weak history including irregular or low
cash flows, you may either have to pay a higher interest or your loan
application might get rejected. Therefore, before you apply for the loan,
double-check the cash flow statements and forecasts to make sure that your cash
flow statement would be enough to repay your loan along with the interest
levied.
Look at other borrowing options
As different lenders have variable
parameters to assess your business’ creditworthiness. Therefore, do not limit
your loan applications to specific lenders. NBFCs, and Digital lenders along
with banks, also offer a platform to compare and choose the right business loan
and also the suitable lender.
Assess your creditworthiness
Banks and financial institutions
consider personal as well as your business credit history while assessing a
loan application. A lower credit score shows you as more likely to default and
can prove to be unfavorable to your loan approval chances. Hence, it is
advisable to evaluate both your and your business credit report to ensure that
your loan application isn’t rejected due to lack of credibility.
Identify risks that lenders assess
When you apply for a business loan,
make yourself aware of various traits which may be risky for you. Possibly, it
includes weak accounting system, low vintage, repetitive defaults in credit
history or irregular revenue. Ensure that your business is not considered risky
due to the presence of any such traits.
Final Words
So, these are the few useful tips
from Mehul Mathrani, to make your
business loan application win-win.
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