5 Point Checklist for a Small Business

5 Point Checklist for a Small Business

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A business loan is an ideal option to meet all the financial crises and problems of business owners. While many business owners take availing a small business loan a hectic, long, and complicated process, the key solution lies in knowing the situation in advance and preparing for the best way to get it. Apart from it, knowing the process also helps in getting the best loan product for your business. It also improves the chances of getting the loan application approved.

The following are some points that you can follow, and you should know before you start the process of availing a loan for business:

Check the CIBIL Score

Before applying for any type of loan, you need to aware of the credit score. A credit score is an important criterion that every lender uses to judge the borrowers’ creditworthiness and capability to pay off the loan. So, your score must match the threshold set by the lending institution to be able to get the loan application approved. You can check your score, and if it is below the required threshold, you can first work towards improving it.

Have a Good Business Plan

A business plan provides a clear picture of what the business is doing and what are its quintessential requirements. It states the business goals and how it operates to achieve the goals. Besides, it also throws light on how to utilise the funds availed under the business loan. Basically, it answers most of the questions of the lender, and thus, it helps in getting quick approval for a business loan. And when we talk about small businesses, they generally rely on the business plans and therefore, it is of great importance.

Know your Requirements & Repayment Capabilities

Many lending institutions have categories of good and bad reasons for borrowing money. So, they require to know the reasons for why you are borrowing money. Keep the reasons in mind, like expenses related to real estate, purchasing machinery/equipment, software development, etc. These are the good reasons for lenders approving the application. And the bad ones include building offices, using for expenses not related to business, recovering loses, etc.

Before applying to the lender, you need to weigh your requirements and also have good answers for availing a business loan. Besides, set your projections correctly, and estimate your budget for the plans and strategies. Notably, the loan amount is vital as underestimating it will create a need for availing more loans, and overestimating will lead you to bear extra interest cost. Also, overestimating may also lead to the lender questioning your credibility.

Compare all Lending Options

There are many lenders and loan products available in the market. You need to perform a thorough research of what all borrower options are available in the market. You can make a list of the banks, NBFCs, and other lending institutions that extend the lending services. Scan through all the available options and finalise the more flexible option with easy to meet terms and conditions, lower interest rates, and fast processing. You can decide if you want to avail a loan for business without security or with security.

Arrange the Documents

One of the important steps in availing a business loan is submitting documents. The most commonly required documents by most loan lenders include ID proofs, address proofs, balance sheet, cash flow statement, income statements, ITR, etc. These documents essentially help in proving credibility and your ability to repay the loan amount on time.

Availing a business loan can be quicker, and you can get funds faster if you are fully prepared. With a checklist of 5 points at your disposal, you can apply for a business loan with being fully prepared.

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