The small-scale business industry is witnessing a boom as every other individual in the market launching business ideas. The number of startups has grown 7x in the past decade to a whopping total of 50k in the year 2018 from the last recorded number of 7000 in the year 2008. However, the biggest hurdle in taking things forward is funding. Small-scale business models and start-up owners are very skeptical about where to get funding for their projects from as for getting a business loan seems to be quite a tedious task to them.
They often end up taking debt from acquaintances at higher interest rates and then paying off becomes difficult, becoming a shady cloud over their business’ success. But what people need to know is that as per the government’s yearly budget, the banks in the country are expected to support small-scale businesses by providing them monetary aid at lower interest rates and more solitude. Here in this article, we will tell you how you can apply for a business loan and what the need of applying for a business loan is.
The first and foremost reason that can influence you to apply for a business loan. While opting to get things rolling for yourself by having your own company, you must have always dreamt of taking your company to new highs one day. And this is what business loans what are for. At one point or the other, you must definitely think about expanding your business’ boundaries which is not possible without stable financial support.
When we talk about expanding business, it is not just confined to making the working space bigger but also about building it with the people. The term expansion means you need a bigger space while hiring new employees to occupy that bigger space. You cannot always keep on offering the same thing since the beginning and need to keep up with the latest market trends, for which you need new talent. And to hire new people, you need money.
If you want a big loan soon, you need to build credit for yourself. It is because most banks or private loan company in India won’t provide a huge credit to young or new businesses if they don’t have a good credit history.
When you start with a small loan and pay the installments on time, it looks good on your credit report.
If your business requires new equipment like computers or heavy machinery, it is important to have good cash on hand. Taking an SME loan in such a situation is worth the trouble. Just make sure you need the equipment and are not doing it because you want fancier machinery.
Same goes for inventory, you need to meet the demand in the market, and for that, taking finance is important.
Now, as you know why you should think of taking up a business loan, the next important step is to learn how to get yourself approval ready. Banks often follow a detailed procedure for granting loans, checking up a lot of things, and you need to be sure that whatever you are putting up & front should all be valid. Let’s understand how you can make yourself loan eligible.
Having a business plan can take your chances of getting an approval a notch up. Make sure the plan has details that show your credibility, your business goals, and your potential to pay off the debt, your finances, etc.
The lender has all the rights to know how his money is being used because that will provide him with insight into whether he will be getting his money back or not. Thus, it is important to tell the lender why you need the loan. Also, always present a rough estimate of the costing and demand only the amount you need. Asking for more than what you need can drop your chances of getting approved.
You must research all the options, like banks, financial institution, online lenders, and so on before you send an application. Know how they work, what interest they charge, if they need collateral, and so on.
Don’t ask for a big loan. It will certainly be rejected, especially if you are a new business. Ask for a small loan or something that will cover your expenses.
These were some of the important things that are required to be kept in mind when you think of getting yourself business loan ready. So, the next time you think of approaching the bank always recall these points first and let us know how things unfold for you.