Business loan is a savior for companies that require capital for growth and investment. However, many business owners still assume business loans (especially unsecured) to be hard to get. But this is not entirely true.
If you follow the correct procedure, getting a business loan is no longer a hard task. The following 5 steps ensure that you easily find the right loan for your business:
1) Find the reason
Business loans are a solution, not a path. In order to have a solution, you need to first have a problem. Many companies take loans even when they don’t need them, resulting in paying unnecessary interest. So, you must have a detailed analysis of why exactly you need the loan before you proceed further. At the same time, assess the amount of loan you would need. You can use a business loan calculator to get the exact amount.
2) Find the right loan
So, did you think that you just need to say “I need a business loan” at a bank? Well, far from it. There are numerous types of business loans, each tailored for a specific use case. The most common is the term loan, where you take the loan amount and repay after a specific period of time. There are less common types like invoice financing, where you get the loan in exchange of the invoice raised against the orders.
3) Find the best lender
Even though most banks provide business loans, the parameters differ among them. To find the best one for you, you would need to dig in. Here are some things you might need to keep in mind:
- Check whether the lender provides secured or unsecured business loans.
- See if there are any concessions for business loans for women.
- Check the lowest business loan interest rate.
- See the attitude of the lender for certain type of loans. For example, some banks are hesitant at granting startup business loans or business loan for new business.
- Check for concessions for small business loans.
4) Check eligibility
Once you find the loan and lender you need, you must check if you are the borrower they need. Since the lender is staking his money on you, he must ensure that you are reliable. Therefore you must consider certain parameters like annual revenue and credit score. These factors play a vital role in getting your loan approved without any hassle. In case you are going for an unsecured loan, you must also review the assets you would be mortgaged to the lender. The location also plays an important role. For example, you might seek the business loan in Delhi only if your business is in Delhi.
5) Gather the documents
The last (and perhaps the simplest) step of the process is to gather all the relevant documents you need to apply for the loan. Generally, the bank or the lender informs you about the documents required. Some essential documents include the income tax returns for past 3 years, company constitution, registration papers etc. In case of unsecured loans, generally more documents are required in order to establish the reliability of the borrower.
These steps would ensure that not only you find the right and best option for the business loan for your company, but also get it easily enough. The correct procedure always yields results.