How To Avail A Small Business Loan In India

how to get approved small business loan india approval lender

The freedom of working on one's own terms and excitement of seeing one's business idea to thrive, are two of the major motivating factors for new entrepreneurs. However, a major hurdle that hinders business owners from moving forward on their chosen path is the lack of funds. As we all know, a business not only requires funds at the very initial stages but also as it progresses, so as to make purchases, grow and expand. 

More often than not, a lack of funds can be sufficed with the help of a suitable Business Loan. Thankfully for business owners across the nation, a large number of commercial banks, as well as online loan aggregators, readily offer such loans. Yet, availing a Small Business Loan in India comes with its own set of challenges. 

Most lenders are inclined to offer loans to already thriving businesses, or to businesses with a commendable credit history, thus leaving comparatively newer businesses, with no or average credit history, high and dry. After all, no lender wants to increase their risk proposition by offering a big-ticket loan to a novice player. However, you need not worry! We have consolidated a list of some simple measures which can help you procure a Business Loan with incredible ease! 

Things To Do Before Applying For A Business Loan 

1. Prepare A Business Plan In Writing 

Whether yours is a new business or an established one, when you are seeking a bank loan such as Citibank Business Loan, you ought to be prepared with a plan to utilize the loan amount, while also being able to justify the expected revenues. 

In this plan, do outline the reason for seeking the loan which may be needed for additional working capital, purchase of inventory, meet payment requirements, business expansion, or diversification. 

The idea is to approach the bank with a clear chain of thought, regarding how you intend to use the money, and what is the expected revenue. This will help the lender perceive you as a responsible borrower, and help you get approval on your loan application with increased ease. 

2. Check Your Creditworthiness 

If you are here, trying to educate yourself about procuring a Small Business Loan, we can assume that you know the importance of credit rating when seeking a formal loan. Once . you file your loan application, the lender will first conduct a check on your credit score, and only if the lender finds your rating satisfactory, will they consider your application for further processing. 

In case you are a relatively new business, with no credit rating, the lender will go on to check your personal credit rating and will base their final decision on the same. 

Before the lender goes on to conduct this check, make sure you check your own score. Ideally, this should be done before you file your loan application. Once you check your score and find it satisfactory enough, you can go ahead and apply for the loan. If not, you should first take measures to build the credit score of your business, or your own. 

A good score will help the lender place their trust in your creditworthiness, thus improving your chances of getting the loan application approved. 

3. Have the Relevant Documents Ready 

Since the lender needs to be doubly sure of your financial standing, and your ability to repay the loan, they might ask you for a series of documents, reflecting your income and your balances. These may include your past Income Returns, Profits and Loss Statements, Banks Statements, and Business Licence among others. It is important that you arrange for all such documents beforehand, and furnish them as and when required by the bank. Your preparedness in this regard will help convince the bank of your responsible behavior, and your organised approach towards the process. 

If, somehow you are missing out on something crucial, be prepared with an honest explanation for the same. More often than not, your loan executive will understand the issue. In some cases, they may even help you with a solution for the same. Besides, keeping your cards open will help garner the lender’s trust in you, thus easing out the process. 

4. Explore Your Options 

When it comes to seeking a business loan, you should take the process in all its seriousness, and search for a lending institution that best understands your needs and offers loan alternatives that suit your business type. 

Process Of Availing A Business loan 

Now that you are prepared to Apply for a Business Loan, all you need to do is follow these steps – 

• Approach the chosen lender, and convey your objective of taking a small Business Loan. 
• Duly fill your loan application, and submit the same. 
• Furnish all the requisite documents, along with your application. 
• When requested, convey your business plan to the loan executive, along with answering any questions they may have for you. 
• Thoroughly read and understand the terms and conditions of the loan agreement complete with the additional charges. 
• Sign the agreement. 

Final Words

If all of this sounds overwhelming steps, you can contact a loan aggregator online and they will guide you walk through these steps without any hassles. Once the agreement is signed, the bank will direct the loan amount in your account, which should take anywhere up to 15 days. Once you receive the amount, you will be liable to repay the same in the form of equated monthly installments or EMIs, as per the stipulated terms.

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