Table of Contents
- Step 1: Come Up With a Proper Business Plan
- Step 2: Determine How You Want To Use Your Finances
- Step 3: Calculating The Amount You Need
- Step 4: What Is Your Credit Score?
- Step 5: Verify Credit Report
- Step 6: Check Out All Your Lending Options
- Step 7: Preparing Financial Statements
- How Does This Help?
The demand for business loans has increased multifold with the growth spurt seen in terms of expansion of small businesses ecosystem. But the issue of lack of awareness regarding business loans has not changed.
It is worth acknowledging that there are quite a few resources regarding business loan sanction rules that are available. Yet, there seems to be a gap between the information and its availability for the masses.
Typically, the resources associated with either real estate, or business, or even finances and loans are comparatively complex since they require a basic understanding of commerce. However, the way that the information is communicated need not be difficult.
In the article, we have tried our best to give you all the information regarding tips to get a business loan, especially during the current pandemic. Efforts have been made to compile the information to provide the utmost clarity.
Let us walk you through the seven steps to get a successful business loan for a new business.
Step 1: Come Up With a Proper Business Plan
The first step for every business, regardless of the end goal, is to structure a detailed business plan. Figuring out a detailed business plan can be intimidating. But it is the basic foundation showcasing the growth potential and strength of the business.
Banks need you to have a strong financial plan to offer you a business loan. The business plan also helps divulge what your business is all about.
Essentially, a great business plan indicates more possibilities for the business to succeed.
Step 2: Determine How You Want To Use Your Finances
Whether you are taking business loans for e-commerce or a manufacturing unit, the expenditure habit also calls for a plan. This is primarily for the sake of Financial Institutions. Before you get a loan, the bank would like to inspect how you would use it.
You may ask why?
Since there are different types of business loans, the Financial Institution needs to have clarity on this before they disperse the funds.
Step 3: Calculating The Amount You Need
With the pandemic still wreaking havoc, businessmen are desperate to know how to apply for a business loan. However, due to the current scenario, businessmen may make the mistake of rushing the process. But rough calculations never work for finances!
Before applying for a loan, you need to indicate to the financial institution the amount you want to borrow. This will help the financial institution give you the best business loan type as per your business requirements.
Keep in mind that having total clarity about the finances is a crucial aspect for businesses that are applying for business loans.
Step 4: What Is Your Credit Score?
If you are still wondering how to get a business loan without problems during the pandemic, you might also want to think of your credit score.
To be on the safer side, always keep track of your credit scores and reports. Ensure that you repay your EMIs in a timely manner to ensure that your CIBIL score is not negatively impacted.
Step 5: Verify Credit Report
The chances of an error in the credit report cannot be neglected. Errors are most likely to affect your credit scores negatively. Regularly monitor your credit files and business credits to avoid this.
In case of errors, rectify the same with a credit reporting agency immediately. Getting corrections made to credit errors often increases the chances of business loans.
Step 6: Check Out All Your Lending Options
When you are confident about the credit score, it is time to assess all the lending options. Look for Lending Institutions that extend the type of loan you need. Go through the Lending Institutions websites to understand how to apply for a business loan during the coronavirus pandemic.
Also, choose lending institutions that offer loans with the lowest interest rates and have the best flexible repayment options.
Step 7: Preparing Financial Statements
Having a proper record of financial statements makes it easier to get business loans for new businesses. Lending institutions will always verify the business balance sheet, the cash flow statements, and income statements.
This is only an affirmation to the lending institution about your ability to repay the loan. Did you neglect the importance of maintaining a business financial record so far? If yes, then it is time that you start with keeping track of your finances in a well-documented manner.
How Does This Help?
No business can grow with funds from savings accounts. It is not just a potential risk but restricts the pace of growth in a business. A business cannot get loans on a whim.
Also, it is important to understand where your business stands. The credit score is the best way to determine how far your business has reached and how much more it needs to go.
If you require business loans, following the above seven guidelines would yield meaningful results in the long run. Needless, to say, business growth is a slow process. Therefore, it will also take time until your business reaches that position to get loans.
These guidelines are specifically more relevant due to various types of loans—the nature of your business, the services, the urgency of funds required, etc. Everything determines the type of business loan you need.
Now that you are aware of the stages you need to cover before applying for business loans, you are equipped with the right knowledge to approach a lending institute. NeoGrowth (RBI registered non-banking financial company) believes in simplifying lending processes. Everyone deserves a chance to grow and have funds at the right time. Check out our website to have a better understanding of why our lending process is different. The best business loan solution starts here!