Small business loans are available from different lenders in the country. An SME business loan can help your business grow, invest in research and development, expand into new markets and enhance the marketing channels. Irrespective of the type of business you own or the industry you operate in, a business loan will help make a significant difference. Here are the key steps to take when applying for a small business loan.
Understand your Options
Various types of small business loans are available in the market today. It is important that you do your homework before applying for a loan. The loan options vary based on the needs of your business. You need to keep all the options open before you apply for the loan. Compare the loan products and identify those that are ideal for your business. You need to consider the length of the loan and the terms of the loan.
Research all lenders
Financial institutions offer various loans for your business. You need to research the lenders and choose a reliable lender for your loan. Compare the eligibility criteria and the interest rate offered by different lenders. Choose the lender that offers low-interest-rate and has flexible repayment terms. You can find complete details with a simple online search. Do not rush this process because choosing the right lender is an important step in getting a loan.
Check your Credit Profile
Before you apply for the loan, check your credit profile and anticipate how the lender will view the score. You can get a free credit report online. Check the credit score and if there are any errors, inform the credit bureau about the same. Several lenders have a credit score requirement and once you are aware of the credit score, you can identify whether you qualify for the loan or not. The lender will check your credit score before approving the loan. If you’re having trouble with your credit score, you can still get bad credit business loans from specialized lenders.
Keep your Financial Statements Ready
Whenever you apply for a business loan, the lender will ask you to submit the financial statements of your business. You need to ensure that the financial statements are prepared and are in order. The statements should reflect the clear position of the business. Your business should be in existence for a minimum period of three years and it should be profitable. When you have the financial statements updated and ready, the loan application will move faster and will be approved in no time.
Identify the Number of funds you need
Now before you make an application, you need to identify the number of funds you need and the purpose of borrowing. Based on where you intend to use the funds, you will be able to decide on the amount you require. Even if you are eligible for a higher loan amount, you should not apply for a loan for more funds than what you actually need. You need to start by identifying the purpose of borrowing and then decide on the amount you require. Borrowers need to keep their repayment ability in mind.
Check Documentation Requirement
Once you have chosen a lender and identified the number of funds you need, you need to check the documentation requirement. Different lenders have varying documentation requirement you need to be aware of. You can get details about the same online. When you apply for SME business loan, you will have to provide KYC of the partners, business registration documents, bank statement for the last six months, audited financial statements, pro forma financial statements and proof of continuation of the business. If you have applied for a secured loan, you will have to provide documents of the asset you plan to hypothecate.
Understand The Terms of The Loan
You need to understand the terms and conditions of the loan thoroughly. If you have any queries, you can ask the customer executives about the same. Understand the penalty in case of default or delay in EMI. Enquire about the prepayment charges and any hidden costs. You need to be aware of what you are getting into. Only sign on the dotted line when you have thoroughly understood the terms and conditions of the business loan.
Use the EMI calculator
If you want to know the amount of EMI you will have to pay each month, you need to use the EMI calculator. The calculator is available online and is free to use. All you need to do is provide the loan amount and tenure of the loan. You will get an estimate in no time. You can change the inputs until you reach an optimal output. The calculator will help decide the tenure on the loan. You need to be very practical when considering the EMI amount. Estimate the monthly inflows and outflows before you agree on an EMI amount. Timely payment of EMI will help build a strong credit score.
Make an Application
With everything in place, you can make an online loan application. You need to fill up the application form and upload the documents required by the lender. The loan application will be processed and approved in 10 to 15 working days. If the lender requires any additional documents, they will inform you about the same. The process of loan application is simple and hassle-free.
Once the SME business loan is approved, the loan amount will be disbursed to your account. You can use the funds for any purpose in the business. Prepare a repayment schedule and ensure timely payment of the dues. The loan will help take your business to its potential. The biggest advantage of the loan is that it has high approval amount and low-interest rate. If you have a profitable business and have the documents in place, you will find it easier to get the loan approval. Many small businesses across the country prefer the loan for expansion of their business. No matter the industry you operate in or the type of business you manage, the loan will help you take it to its potential.