You may have an excellent idea that could grow into a successful business. However, the lack of funds may prevent you from executing your idea. A common option to avail of the necessary capital is to apply for a loan.
However, entrepreneurs often find it difficult to raise institutional funds. Here are seven steps that will help you access funds required for the growth of your business.
Prepare a detailed business plan
Financial institutions review your business plan before approving your loan application. This plan gives them an insight into your business idea and the execution strategy. The business plan must include mission, goals and vision. In addition, it must clearly provide details on how you will achieve these objectives.
Determine the use of funds
You must provide information to the lenders on how you will use the business loan amount. When funds are required for purchasing equipment or developing a software application, the financial institutions are willing to approve your loan.
Know the amount you need
Business loans in India are available for amounts between INR 3 lakh to INR 75 lakh. It is important that you neither overestimate nor underestimate your requirements while applying for the loan.
Check your credit score
Most lenders rely on your credit history to determine your loan eligibility. It is recommended you check the credit score before applying. In case your credit score is low, it is advisable to work towards improving credit score prior to applying for a loan. A good credit score will also help you qualify for an affordable business loan interest rate, which is beneficial in saving money in the long run.
Analyze different lender options
Various banks and non-banking financial companies (NBFCs) provide loans. Certain lenders have a stringent eligibility criteria. Conducting extensive research on different institutions and their offerings will help you select the best lender that suits your requirements.
Maintain accurate records
Lenders are willing to offer loans to businesses that maintain accurate financial statements. The institutions analyze various accounting statements, such as the profit and loss account, cash flow statement and balance sheet to determine your loan eligibility. Maintaining proper records also assures the lenders of your loan repayment capability.
Arrange the documents required
When you apply for a loan, you need to provide additional documents along with the application form. You will have to submit documents, such as income tax returns, bank statements, identity, & address proof and audited financial statements. Ensuring you include all the necessary documents while applying for a loan will ensure you qualify for the loan.
Business loans help you take your business to new heights of success. Availing of a loan is not as difficult as it may seem. Applying for one after checking your loan eligibility online will help you get the loan approval quickly.