Getting a business loan in this economic crisis is no easy task. While the small business owners are struggling hard to keep themselves out of payment defaults, the lenders are also worried about assessing potential customers. With the exacerbated economic condition of 2020, this is understandable.
If you are thinking of opting for a small business loan, you need to have a good understanding of the business loan eligibility criteria. Sound knowledge of the requirements will make your loan approval process easier. Various banks such as Axis Bank, Bank of Baroda, SBI, HDFC Business Loan, and so on offer business loans.
You can choose any of these banks for a small business loan, but first, know the steps of getting it approved.
Steps to get your Small Business Loan Approved
There is a certain process to get a small business loan approved. Here is the list of steps to get your business loan approved.
Do proper research
Before availing of a small business loan in any of the banks, you should do thorough research. You need to know about the different kinds of business loans offered by various banks. So that you can choose the one which is most suitable for your small business. You should also find out about the documentation and repayment procedure.
Select the right loan
After checking out various loan options, you need to pick the loan that best serves your small business. While choosing the loan, select the one that offers the most reasonable rates and repayment option. The loan amount should also adhere to your credit score and earnings.
Select a lender
After finding out about different kinds of loans you need to choose a lender. This may be a bank or any other lender with an existing relation or a new one. If it is a new bank, you need to make sure it provides you with the business loan you have picked.
Fill the application form
Now you are ready to fill the application form. The paperwork is usually of a few pages but might vary from bank to bank. Submit the dully filled and signed form along with the required documents.
Follow up with the application process
The procedure doesn’t end with filling the application form. You have to keep following up with it. The bank may need further documentation and you may also have to explain certain aspects of your credit score, earnings and expenditures.
Self-assessment is very important
You need to check your credit score to improve your chances of business loan eligibility. You also need to make sure you have the documents of all your earnings, else it cannot be included while applying for a loan. After these points are evaluated thoroughly, ask yourself if you are worthy of a loan, if the answer is negative, take a step back and try improving your credit score and financial health.
Before visiting the bank for a loan, kee[ your documents ready. This will not only save you time but also help the bank to progress faster. It will also unleash your stress of further clarifications that may be required later. Here is a list of documents that you must keep ready.
- Tax Returns of two years
- Profit and loss statement along with business balance sheet
- Agreement of business option
- Tax documentation of the individual who owns 20% or more than that of the business
Tips to improve the chances of business loan approval
There are certain measures to get a small business loan approved faster. Here is the list for you.
Strengthen your relationship with the bank
Having a good relationship with a bank always helps. This certainly does not mean your loan will be approved for sure but the process will become easier and swift. You should also have someone to voice for you so that the bank can find you reliable.
Enhance your credit score
Improve your credit score before applying for the loan. Check whether you have any outstanding debts and clear those. This will increase your chances of loan approval.
Do not waste time
After filing in the application don’t think twice of checking on your application status regularly. The bank might also be in need of further documents. Make sure you keep providing them with the documents; otherwise, your application might go down the pile.
Besides all this, you should always make sure of the type of loan your business needs. Applying for the wrong loan can adversely affect your business. It might damage your credit profile as well.