Before Applying for a Loan read these 5 Requirements for Getting Business Loan.
Imagine spending days and nights racking your brain, skimming through different ideas, all in your little head trying to get hold of that brilliant idea for a business. Stressful, right?
Yahoo! After several trials, you finally get hold of that perfect business idea, and instantly, you feel the nudge to execute it. Feels like you’ve performed magic, yeah?
Then your lack of funds for its execution dawns on you and you suddenly realize you’re no magician. It’s no big deal! Countless business owners were once in the same spot. This is the entry point of business loans. But unlike personal loans, getting these loans doesn’t come easy as it can prove to be a daunting task.
What is a Business Loan?
A business loan is classified as a type of credit vehicle or unsecured credit, the business owner can avail to for the commencement of the business activities like
– Machinery and equipment financing
– Increasing working capital
– Financing inventory
– Paying off outstanding salaries
– Meeting requirements of marketing expenses
– Paying off business debts
– Setting up a new branch or taking up a franchise.
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This loan helps the business owner increase the cash flow through business finance, on-time payments and enables smooth business functioning.
Although the loan proves to be a business’s financial friend, it is hard to secure a business loan for your business. There’s a high possibility of your loan application getting rejected. As a result of their failure to meet the lenders’ requirements.
However, after a series of research, I’ve put together the top 5 requirements of lenders to ease up your business loan application and boost your chance of getting accepted.
Also read: Email Marketing: 12 Smart Tips for Business
5 Business Loan Requirements
- Build Your Credit Score
- Own a Steady Source of Income
- Draft a Solid Business Plan
- Provide an Enticing Collateral
- Provide and Sign Every Required Document
Build Your Credit Score for Business Loan
Business leaders tend to take a careful stare at your history of personal credit before considering you for a loan. It’s a good idea to address any stain on your credit slate before applying for a loan.
A perfectly built personal credit score portrays you to be trustworthy and it directly impacts lending decisions.
Also read: Start Up India
Own a Steady Source of Income
Having a constant cash inflow is advisable before applying for the loan. The source can be a steady paycheck, or passive income, or any other legal source. A steady income source suggests your ability to pay up any debt.
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Draft a Solid Plan for Business Loan
A successful business is successful even before its existence. The feasibility of a successful business is visible from its business plan. You should draft a proper plan before applying for a loan.
A foolproof business plan should include every little detail of your business, ranging from the most important to the least important.
Your business plan should include details like location, marketing strategy, finance, etc. This will directly impact lending decisions.
Also read: Bill Flow Errors: 6 Ways to Avoid in Business
Provide Enticing Collateral
Collateral is the most popular requirement for a loan application. Providing enticing collateral boosts the chance of your business loan application getting accepted.
Enticing collateral is collateral whose value is worth more than the loan you’re applying for. And it might get you a loan with lower rates.
Provide and Sign Every Required Document
While applying for a loan, you’ll be required to provide important documents like your personal financial details, information on your insurance, your audited financial statement, etc.
Also, you’ll be required to sign certain documents like agreement on loan interests, time and date of the loan payment, agreement on future ratios, etc.
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Conclusion
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Getting a loan can be overwhelming, especially when you’re not fully aware of the basic requirements. However, using this article as a guide will surely be helpful.
However, the Top 5 Requirements for Getting a Business Loan are inspired by the need to guide aspiring entrepreneurs to secure funds for their dream businesses.
Also read: Business Success During Post COVID-19 World
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