Things to Do Before Applying For Small Business Loans

Loans are an essential resource for business growth. If you are planning to apply for small business loans, do the background work carefully to ensure hassle-free sanction. 

Small business loans are an effective aid in planning business expansion. Capital is the first and the foremost thing required for smooth running and time-to-time expansion of any business regardless of its volume. A small enterprise would require less amount of capital than an established firm/company for sure.

However, most of the times, banks support these small business units as their source of finance and help in growth. You can always apply for business loan for expansion related requirements or any other. All you would need is a thorough preparation so that your loan proposal does not get rejected.

Here are some of the basic tasks that the small business owners must consider before applying for business loans to make sure that the same gets sanctioned smoothly.

A Strategic Business Plan

Business loans for small businesses are issued based on the merit of their business plans. The more future opportunities a plan reflects, better are the chances of having a loan sanctioned.

If necessary, you can also consult professionals while creating a business plan. The plan must have a clear projection of future returns for the specific loan amount to establish the worth of the project to the lending authorities.

With a strategically outlined business plan, the best small business loans can be availed easily.

Financial Statement

Banks generally issue the loans keeping the financial health of the organization in mind. If the issuing authority comes across any discrepancies in the financial reports submitted with the loan application, the request might be put on hold or get rejected depending on the severity of the mismatch.

Therefore, while planning for a bank loan for business, make sure that you have prepared your financial statements. This is vital to maintain transparency and provide all the required detail to avoid chances of rejection.

Purpose of Small Business Loans

The documents and application submitted for the business loans must have a clear mention of the purpose of applying for the loan. Some reasons are regarded as ‘good reasons’ or ‘favourable reasons,’ which can increase your chances of an early loan sanction. Hence, consult an expert and indicate the purpose that appears suitable and can be backed with facts.

Personal Credit of Business Owners, Guarantors and Business CIBIL Score

The better the CIBIL score of the above-mentioned 3 parties, higher are the chances are of getting the loan approved. CIBIL score clearly states the personal credit history of a person. The financial institutions take that as a yardstick for judging an applicant’s probability of not being a defaulter.

Collaterals

Collaterals can be another way of convincing the lenders regarding their win-win business deal by approving the loan proposal. Your collateral must at least match the value of the loan requested to make the strong fore-ground for business loans. It should preferably in the form of immovable property mortgaged to the bank.

If you are looking for small business loans, Shivalik Bank can be an excellent choice as they are a one-stop-shop for corporate loans at a reasonable rate of interests and flexible conditions that are apt for the small firms.