Are you on the journey to begin a business? Or do you wish to expand your existing one? Growing or starting a business requires a lot of funds. Hence, one of the ways to finance your business is by availing a online business loan.
Many financial institutions offer business loans at a reasonable interest rate, giving you a user-friendly and fast interface to apply and avail of the loan instantly. Such a loan can satisfy your organisational needs and requirements effectively. Hence, this post will give you a walkthrough of the business loan application process.
Overview Of Business Loans
Similar to how people avail of a personal loan to fund their personal needs, businesses do require loans to;
- Grow their business
- Establish additional branches
- Increase inventory
- Recruit other staff, etc.
A business loan covers all these factors so that you can focus on approaches to expand your business and strategise how to find them. So here are the different types of business loans you can try out for your company:
- Term Loans
- Working Capital Loans
- Letter of Credit
- Bill/Invoice Discounting
- Overdraft Facility
- Machinery Loan or Equipment Finance
- Government business loan schemes
- Merchant Cash Advance or POS Loans
How To Apply For A Business Loan?
Here is a step-by-step process to obtain a business loan:
1. Identify Your Need For A Loan
This is the first vital step you must carry out in your loan process as you will have an organised plan as to why you need the loan. This will ensure the lenders that you need funds for a genuine requirement of your company.
2. Have A Mapped-Out Business Strategy
Once you identify why you need a business loan, create a business plan. This lets lenders understand where you will spend and distribute funds in your business, revealing your intention to grow your company.
So have a concise yet detailed business plan to prove to the lender that you can make repayments on time. This will help in avoiding loss on the lender’s part. Additionally, do mention these pointers in your business plan to get your application sanctioned:
- Your business’s motive
- Company’s future goals
- Company’s past achievements
3. Research and Compare Lenders
This is a crucial step in your loan journey. You must prioritise finding an authentic lender and the best loan options while availing of a business loan in Delhi, Mumbai or any other city in India. Since numerous financial institutions are offline and online, it’s best to research and compare loan options and know the lender’s loan terms and eligibility criteria.
If you wish for quick loan approval, you must apply online. Otherwise, visit the lender’s branch with a duly signed application form and the needed documents.
4. Identify Your Current Credit Score
Generally, lenders favour applicants with a good credit history and a CIBIL score over 700. However, an adverse credit history with missed or late payments can be an alarm for lenders. Therefore, it’s best to check your credit score before approaching the lender to get a business loan. In Delhi and other metro cities, there are financial institutions with both offline and online presence. You can apply after checking your credit score. If your score is low you can take steps to improve your score.
5. Calculate Your Emi
Calculate the necessary funds for your organisation to avoid adding more debts leading to bottlenecks. Check whether you can repay them on time, as you must also pay interest on the principal amount you borrow during the repayment tenure. You can use a business loan EMI calculator to find out how much you have to repay monthly to the lender.
6. Know Your Eligibility
Apart from the credit score, some lenders require you to fulfil the age, business vintage, turnover, credit score and minimum monthly income requirements of the lender.
What Happens During A Business Loan Application Process?
Generally, when applicants apply for an offline or online business loan, their interest lies in getting the loan amount disbursed. But knowing the entire application process is equally important to have a seamless application journey.
Here are a few steps involved in the process most financial institutions follow for processing a business loan application;
- The business owner must apply to the financial institution of their choice, choosing the channel at their convenience. Upon applying, the financial institution requires copies of KYC and other supporting financial documents for verification.
- Then the application is examined on the basis of factors like the CIBIL score of the owner and the company. If it’s suitable as per the lender’s requirement, the loan application gets approved.
Conclusion
business loans can be a great alternative for financing your business. Following the online business loan process as set by your preferred lending institution can help you in obtaining the loan easily.
Read Also: What Factors Affect the Interest Rate in a Personal Loan Pre-approval?