Things To Keep In Mind Before Applying For Business Loan Post Lockdown
Jan 10, 2021
Apparently, the business needs capital to kick-start the profit-making cycle. Liquid money is an essential element to run operations smoothly. Applying for a business loan can help you tide over the repercussions of COVID-19 and help you realize your financial goals. Here is what you need to keep in mind before applying for a business loan post-lockdown.
Banks have the authority to determine the criteria, which makes you eligible for a business loan post-lockdown. Before applying for a business loan, you need to perform an internal assessment. These could include the following-
- You need to estimate your business’s minimum and maximum financial needs for a smooth operation.
- An action plan will help you extensively to determine the type of loan that will fit your business’s credit situation.
- Estimation of business loans, rate of interest, and loan repayment terms are important criteria to decide before applying for a business loan.
How to get approved
Financial institutions and lenders will use their discretion to approve loans only for the most eligible borrower. You can secure your loan approval if you meet the stringent requirement of the lender. Here are the following things you should keep in mind before applying for a business loan.
- You should keep your financial documents in place and updated.
- It is essential to ensure that you meet the business loan eligibility criteria.
- Before applying for a business loan, it would be best to increase your credit score for desirable results.
- Apply for a loan where you are most likely to meet with success. Narrow your search to the most potential lender.
- Keep your repayment track admirable so the lenders do not doubt your creditworthiness.
- Prefer to go to your trusted lenders where the chances of loan approval are higher and the paperwork remains minimal.
Your credit history is the reflection of your repayment pattern. The recorded credit report assimilates your responsibility for repaying debts on time. A credit history summarizes information regarding credit accounts, duration, type, credit inquiries, and timely repayment of bills. Since the lender is at risk, he needs to make a rational judgment about giving a business loan to the borrower based on credit history.
Financial institutions and banks approve of loans after assessing your credit score. A healthy credit score puts you in a comfortable zone and increases your chances to get a business loan readily. Banks approve business loans for firms with a minimum of 600-700 credit score
Apart from KYC, you may need to present essential financial documents of the previous financial year for successful loan approval. Enlisted are the commonly needed documents-
- Filed Income Tax Returns
- Previous six months’ bank account statement
- The last two years’ balance sheet and profit and loss statement audited and signed by a CA
- Proof of ownership
- Credit score
Rejection of Business Loan
Despite your earnest efforts, if the business loan gets rejected, you need to analyze the reason for rejection. You can reapply for a business loan after revising and upgrading the requirement to satisfy the lender. Here are a few pointers that can improve your eligibility for a loan application.
- You should approach a reputed credit rating agency for checking your credit score.
- Repair your credit score if it is below 600.
- Check whether the amount of business loan is within the eligibility limit.
- Recheck if all the documents are attached and in order.
- You can opt for short-term flexi loans.
- You can improve your bank balance.