Business loans are a necessity when a company is suffering financially or is in dire need of funds to expand, upgrade existing machinery or buy equipment. A business loan can be availed through a variety of sources, from government-backed loan schemes to private/public corporations that offer loans to small or big businesses. However, getting a business loan is not as simple as getting any other type of loan as the documentation and selection criteria to differ.
Depending on your company’s age, financial capability and the value of assets, you will be able to determine whether you should apply for secured or unsecured business finance. Small business fundingeases out the loan process for SMEs that are struggling financially.
Unsecured business loans are the kind of loans that are granted to a company even without submitting collateral.
Regardless of your decision, both secure and unsecured loans would require you to fill up forms and provide the necessary documentation for the loan to be processed. Unsecured loans are usually driven out faster as the process involved in evaluating the collateral is omitted.
Your documents, personal and company status would help determine the chances of getting the loan sanctioned. Some factors help improve the possibilities of your loan getting approved while some factors might reduce your chances of getting a loan significantly.
It is very disappointing for a business owner when a business loan gets rejected as he might need to approach a different lender and start afresh with the application process. Rejected loan applications delay the healthy functioning of a company.
To boost the chances of getting a loan approved, let us talk about the best practices to increase the possibility of getting a business loan.
- A good credit score: One major factor that all lenders would look into when considering your loan application is your CIBIL score. A high credit score suggests that you have been regular and diligent in paying off previous dues and loans. This helps your potential lender trust your financial capabilities. This enables the lender to sanction your loan confidently. It is a healthy practice to honor cheques and pay off outstanding dues on time in order to maintain an impressive credit score.
- Providing adequate documentation: When applying for a business loan, you would be asked to present a number of documents such as ID proof, residence proof, bank statements and so on. Providing expired and irrelevant documents might lead to your loan application getting disqualified. It is thus very important to make sure that the documents you have provided are renewed and updated
- Specifying your revenue plans: Your lender would feel more confident if there’s a concrete revenue generation plan. As this will help the lending companies understand how you plan to generate revenue to repay the loan amount. Especially in the case with unsecured loans where there is no collateral deposit, it might then be advisable for the borrower to explain how he is planning to use the loan amount and how he is intending to pay it back. The chances of getting a loan approval are high when there is financial transparency being maintained between the lender and borrower.
If you are looking for an unsecured business loan, then the above-mentioned practices will surely increase the possibility of getting your loan sanctioned without any delay.
Unsecured business loans are easy to avail because collateral-free benefits do not demand any security. When it comes to availing of an unsecured business loan a good credit history or CIBIL score should be maintained, adequate documentation should be handy and revenue generation plans should be specified clearly.