#10 Simple Steps to Get a Business Loan
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Every business needs to grow and an infusion of cash helps the company move forward in a positive way. Business loans are a great way to finance the growth and its related expenses. However, there are certain essential factors that one should consider before applying for such loans.
Applying for a business loan is not necessarily a complex process, but, better preparations ensure your chance of success. Following some steps and opting for a lender that focuses on SMEs can make your business funding quite simple. There are a host of lenders who provide SMEs with quick and easy access to the right loan for their business. Check now if you qualify for fast finance-
Considering these factors carefully can maximise the benefit and profitability you derive from your business loan.
1. Why do You Need a Business Loan?
This will be the first question you will face, so prepare your response ahead of time. It is very important to know about your need and eventual utilisation of the loan. Business loans are used for numerous purposes — it could be the purchase of inventory, equipment, supplies or furniture or even for working capital. The rationale behind your loan will decide the nature of loans available and the banks that are ready to support you.
2. What are your Lending Options?
It is important to mull over the lending options accessible to Indian SMEs and figure out the best option for your business. Apart from the conventional lenders, there is an emergent trend towards unconventional lenders to provide business loans to SMEs. You can consider national and local banks, credit unions, and non-profit micro-lenders. These lenders offer business lines of credit, small business loans, and even personal loans.
Other options including personal loans, crowd-funding, and business credit cards can also be a smart alternative as the application is generally easy, and the agreement is generally fast and trouble-free.
3. Find out Your Credit Score
Once the type of loan you require is determined, the next step is to work out whether your eligibility for a business loan. Most banks, including those offering business loans, depend on the personal credit of the business owner(s) when making decisions.
4. What are Your Specific Business Goals?
Your goal is a very important factor in applying for a business loan. You need to have clear idea about whether your objective is to spread out to new markets or offer a better product/service to the niche market. Your first step should be to delineate your target.
5. What Specific Actions Should you Implement?
Once your goals are set, it is important to break classify them into specific stages that will assist you meet your aspirations. If your aim is to target new markets, you will need to initiate fresh marketing programmes as well as hire resources to sell and provide support to the targeted market.
6. How Much Money do you Need to Borrow?
Money is the lifeline of any business. Before you apply for a business loan, you must zero down on the amount of money you need as a loan. To do this you have to work out the capital you need to support the activities necessary to meet your business goals.
7. How Long do you Need the Loan for?
It is always advisable to prepare a business plan to project the time period for which you will require the supplementary financial support.
8. Write (or update) Your Business Plan
A detailed business plan is the primary medium of selling your vision and financial strength to the lender. A strong business plan puts forth your company’s story, from its foundation to its relationship with the market. It illustrates your business’ mission and the roadmap for achieving goals. Financial reports provide a complete analysis of what you’ve already accomplished and your future plans.
Lenders believe that companies submitting a comprehensive business plan have a better chance to succeed and pay its loan back on time.
9. Gather Documents and Apply for Your Loan
Business loans often require extensive paperwork. Loans with banks, credit unions, or online lenders ask for additional details about yourself and your business. Be prepared with the documents.
10. Wait and Re-assess (if Necessary)
Processing times for business loans depend on the type of loan and the amount requested. While some take weeks or months for approval and funding others get back to you in a day or two.
If you are refused, find out the reason for the unapproved loan and improve your odds next time. Often there are opportunities available which fit you and your business better. Remember that every time you apply for a loan a hard credit inquiry is carried out, and each inquiry can drop your credit score by a few points.
The best way to get better at your odds of bagging a business loan is to invest time in your groundwork before submitting an application. If you need help with your credit or cash flow, take necessary steps to develop these areas before approaching banks. Once you are confident about your position, evaluate business loans to identify the right lender for you and your company.