Business Loans serve various purposes, including refurbishing your office premises, ensuring steady cash flow to manage operational costs, facilitating expansion into new markets or locations, and building inventory to meet customer demand. These financial resources can help drive growth and enhance overall business performance.
Understanding the essential steps in the procedure for Business Loan can greatly enhance your chances of approval.
Steps in the Business Loan application procedure
1. Assess your needs and loan type
Before approaching any lender, it's vital to clearly understand why you need a Business Loan and how much you need to borrow. Determine the specific purpose — whether it’s for startup costs, expansion, equipment purchase or working capital.
Depending on the size of the business and the specific needs, you can select from various MSME and SME Loans or Working Capital Loans. If the primary goal is to purchase equipment for expansion, a Machinery Loan may also be a suitable option.
2. Evaluate your creditworthiness
Lenders assess your ability to repay the loan by examining your credit history and credit score. Ensure your personal and business credit reports are accurate and address any discrepancies beforehand. A credit score above 700 improves your chances of securing favourable terms. In a Startup or Small Business Loan application process, if you have no credit history, then you may be required to provide collateral.
3. Develop a solid business plan
A well-structured business plan should detail your business model, market analysis, competitive landscape, revenue projections and financial statements. Lenders need to see a clear roadmap for how the loan will be used and how you plan to generate sufficient revenue to repay it.
4. Get essential documents ready
Prepare a comprehensive set of important documents. This typically includes:
- KYC documents of business owner (PAN, Aadhaar)
- KYC documents of the company (PAN, GST certificate, IT returns, certificate of incorporation, board resolution, etc.)
- Balance sheets and income statements
- Cash flow statements
- Latest bank statements
These documents provide lenders with a snapshot of your financial health to gauge your ability to manage debt.
5. Research potential lenders
Research various lenders, including traditional banks, non-banking financial companies (NBFCs), online lenders, etc. Compare their loan products, interest rates, repayment terms and eligibility criteria. Choose a lender that best suits your business needs and profile.
Each lender will have specific requirements for their loan application. Ensure your application is complete and accurate. Be ready with essential documents, like your business plan, financial documents, KYC, collateral, etc.
6. Collateral-Free Business Loans
While offering collateral can expedite your loan application and secure a higher loan amount, it's possible to obtain a Business Loan without collateral. For example, Axis Bank offers Collateral-Free Business Loans for amounts up to ₹75 lakh if your business has been operational for at least 3 years.
Also Read: Borrow wisely: Benefits and drawbacks of Business Loans
Conclusion
A Business Loan application process requires careful planning. By assessing your needs, evaluating your creditworthiness, developing a solid business plan and gathering essential documents, you can streamline the application process. Additionally, researching potential lenders and understanding the option for collateral-free loans can provide you with greater flexibility.
Skip the hassle of visiting banks in person and take advantage of Axis Bank’s instant 24/7 Business Loans. With minimal paperwork and a streamlined process, the bank offers loan amounts ranging from ₹50,000 to ₹20 lakh at attractive interest rates.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
