Does your business need financial support to grow? But not sure where to get loan? Don’t worry, read on to know.
SME Loan can be very crucial for a business to bloom; with adequate financial support an organisation can diversify and reach new market territories, fund new inventories or hire more manpower.
Small and medium-sized businesses can avail loans from banks, NBFCs, etc. However, NBFCs are quicker and more flexible to provide customised loans to the SMEs. Traditional banks have stringent documentation policies and fixed EMIs, whereas most NBFCs require basic documentation to meet the eligibility criteria.
Loan approvals for SMEs can be tricky if you are not prepared, familiarising with the lender’s requirements is quite essential in this matter.
Follow the tips mentioned below to get a successful loan for your business –
Be Ready with your Documentation
It is always beneficial to be prepared; before reaching out for the loan assemble the essential documents. Most traditional lenders ask for a wide range of legal and financial documents for authentication.
Some of them are –
Income Tax return files of the previous year.
Audited balance sheet and financial statements for last year.
Establishment certificate, PAN card, Aadhar etc.
Business or commercial licenses.
Resume showing industry experience and future projections.
They can also ask for Government approvals, contract agreements, and building plans if necessary.
Focus on Better Credit Scores
Your credit score can range from 300 to 900, the higher, the better. This is used to evaluate your ability and repay the credit loans. Easily avail an SME loan with scores more than 700. Borrowers with consistent and disciplined credit history get higher preference for loan approval.
Most of the financial institutions focus on the transactions of the recent past; they do not pay much attention to a delayed loan payment dating back to 10 years or more.
As an excellent CIBIL score ensures your creditworthiness, hence, increasing it should be your prime aim. Achieve this by clearing all of your credit dues by paying off the outstanding amounts and not missing any future payments.
When getting rejected for a loan, do not keep applying continually as this could leave a bad mark on your credit history. Also, make sure there incorporates no error in your credit history which could further lower your credit score and consequently damage your possibilities of getting the loan approved.
Furthermore, good credit history can help you to sanction pre-approved loans from NBFCs.
Be Aware of the Eligibility Criteria
Every lender offers different interest rates as well as infuses various eligibility criteria. Choose a suitable lender whose minimum criteria you meet effortlessly, and is flexible enough to offer your business a customised loan.
A business loan in the time of emergencies can be hard to get for some new small business entities. They can hire additional help who works as a catalyst and help these entrepreneurs to co-ordinate with the banks and smoothen as well as expedite the process.
Project a Strong Business Plan
Any lender, be it any bank or NBFC, will be genuinely interested in your company as they are loaning you the money and needs to make sure that your company will be able to pay back the amount within the deadline.
Hence, your business plans should exhibit an exciting and feasible business plan that would trigger enough cash flow in the future, and there will be no constraints while repaying. A good business plan would easily gain the confidence of the lenders and increase the chances of loan approval.
Recently, some financial scams have rocked the whole nation. Since then, most of the banks and NBFCs are looking to implement some strick regulations to avoid the unfortunate events.
However, following the tips mentioned above, one can easily apply for a SME Loan and hope to get it sanctioned.