A business loan is now more frequently the most economical way for a company to expand and survive. As a business owner, you constantly investigate the best strategies to obtain business loans from various lenders for expanding the enterprise. Business finance may be used for everything from infrastructure improvements to new product launches and cash flow management to help your business grow swiftly.
Any professional or non-professional (self-employed) business entity can receive business credit relatively easy. Moreover, unlike conventional financing, today’s lenders have made business credit more broadly available, particularly to small businesses.
Step by Step Business Loan Application Process Explained
Understand the different types of loans and how to apply for them
People frequently equate Business Loans with stringent eligibility requirements and lengthy waiting periods, creating misconceptions regarding how to get Business Loan. Today, obtaining business credit is quite simple, with a range of options to select from. From business expansion to equipment financing, you may choose the suitable form of loan for your needs. The Business Loan process starts with calculating the amount you require.
The following are examples of standard Business Loans:
Micro, small, and medium-sized enterprise (MSME) and small and medium-sized enterprise (SME) Loan
A loan specifically designed to help micro, small, and medium-sized businesses finance their operations.
Loan for working capital
A loan to fund a company’s day-to-day operations, mainly when liquidity is limited.
Machinery Loan
A loan that assists businesses in obtaining financing for purchasing new equipment or machinery to increase production.
Apply with a lender of your choice once you’ve narrowed down the type of Business Loan you want. You can either apply online or offline, depending on your preference. But first, double-check that you fully comprehend the eligibility requirements.
Prepare important paperwork
Do you know why business finance approvals get delayed at times? The majority of this is due to a lack of adequate preparation. On the contrary, if you prepare the necessary documents ahead of time, you will be able to provide them on time and naturally speed up the procedure.
Furthermore, the verification process has become much more lenient in recent years. Many lenders now offer an online verification service you can use from anywhere. You must only upload the required documents in the desired format.
Lenders usually contact you to update you on the status of your application once validated.
However, because paperwork requirements in the Business Loan procedure vary by lender and loan type, you should always check with the lending institution before proceeding. In any case, a lender may request that you provide documentation such as:
- Completed application form
- Detailed business plan
- Company bank statements for the previous six months
- Company KYC documents (PAN card, Ownership papers)
- Business owner KYC documents (CIBIL score, PAN number)
- Income tax returns for the previous two years
- Audited balance sheet for the previous two years
- Document verification is one of the most critical processes in the Business Loan application process. Ascertain that all the documents are attested and audited. Any incorrect papers will result in delays.
Make use of a loan calculator
Filling out the precise loan amount you can afford to borrow is another simple technique to get acceptance. Many lenders now provide a free online Business Loan EMI calculator. Use one to figure out how much you can afford to repay without a problem. Because lenders often evaluate creditworthiness based on income, so your monthly income should ideally balance the sum.
Be cautious of some factors
Loan acceptance is usually the most time-consuming of the several processes in a Business Loan application. While there are ways to expedite the approval process, most of them are ineffective. This is because loan approval is always done on an individual basis, regardless of how well you prepare the appropriate documents. As a result, what works for one borrower may not be suitable for you.
Nonetheless, if you exercise discretion in the following areas, you can swiftly shift the tide in your favour:
Type of loan
Applying for a working capital loan makes no sense if you merely need the money to finance inventory purchases. To avoid bad debt, make sure you choose a loan kind that fits your company’s demands. You can also get a competitive Business Loan interest rate if you get the correct form of a loan.
Business plan
Be completely honest about your company’s financial health, with no omissions or additions. Also, describe how you plan to use the borrowed amount to win the lender’s trust. To make financial estimates, you might utilize a Business Loan EMI calculator. A thorough business plan backed by a good credit history will boost your credibility and, as a result, your chances of acceptance.
Credit score
Make sure you have a credit score of at least 700 to ensure loan acceptance, mainly because most lenders will use it to determine your Business Loan eligibility. If not, try to improve your score before applying.
Personal interaction with a loan officer/underwriter should be expected in addition to the abovementioned factors. Lending institutions speak with borrowers to better understand the loan’s various goals.
They may inquire about your educational background, previous debts, sources of income, and other factors. Maintain transparency in your responses to ensure the conversation finishes on a positive note. Talk openly and confidently about your financial situation.
Also Read: Pros and Cons of Long-Term Business Loan
Techniques to Use for Quick Disbursement
The time it takes for a Business Loan process from application to disbursement is usually 3-4 days, depending on how well you filled out the application form. In some situations, lenders may postpone or refuse a loan if they discover inaccurate information or a missing data field. You must apply carefully because a loan application form collects crucial information about the borrower. Otherwise, you may have to start all over with the Business Loan application process.
To sum up
Business finance provides an effective way for businesses to generate capital and grow, from business expansion to cash flow management. You can also calculate the Business Loan interest rate you can afford. Lenders usually charge higher interest rates for large sums. A corporation can benefit from lucrative financial leverage and plenty of additional financial advantages.
- 6 Benefits of taking a Business Loan
- Instant access to required funds, frequently without the need for collateral.
- An application process that is generally simple and quick.
- Estimate EMIs easily with tools like a Business Loan calculator and a GST calculator, among others.
- Keep enough liquidity in the system to cover any temporary gaps.
- Establish a positive credit history by making on-time payments.
- Finance various corporate operations, including everything from new equipment to payroll.
- Aside from the advantages listed above, business financing also has tax advantages. Yes, you can write off the interest paid on your loan as a business expense to get tax deductions and lower your overall tax bill.
FAQs
1.What are the four stages of the loan process?
As a customer, you need to follow the four stages of the loan process
2.Research & Apply: Understand different types of loans and how to apply for them.
Check Eligibility: Make use of a loan calculator to check the eligibility criteria.
Documentation: Prepare the required documents.
Submitting the Loan Application: Fill out your details and upload the documents at the time of submitting the loan application.
How to process an online loan?
To process an online loan, you need to follow these steps
3.Visit the lender’s website and fill out the application form.
Enter your details and upload the relevant documents.
Wait for the verification of the lender.
Post successful verification and approval, authorize the loan disbursal.
The loan amount will be disbursed into your bank account after your authorization is confirmed.
