Are you planning for a business but are confused about where to start, finances, expenses, and future?
Availability of finance is usually the first step in starting a new business. There are various resources for getting the funds for your business. A loan is the most convenient option for any business, whether small or medium. It gives you ready money and allows you to focus on the other areas of your business.
You can avail of a business loan from different banks under plenty of schemes offered by them. Once you decide to get a business loan, make sure you have all the necessary documents in place and handy to avoid unnecessary delays.
- 1 Here we’ve drafted 5 common hurdles you need to tackle while availing of business loans.
Here we’ve drafted 5 common hurdles you need to tackle while availing of business loans.
1. Making a business plan
First of all, you will have to write down your complete business plan. That may include the process involved in manufacturing the product, infrastructure required for a certain capacity, manpower planning, steps for marketing and selling the products, etc. The plan must be feasible and convincing to the bank officer responsible for sanctioning the loan for your business.
Based on your portfolio, the bank officer may visit your site to verify and check the feasibility of your project. Then they look at the project details and guide you on whether you will need any securities or not. You must have a fixed asset to pledge against the loan.
2. Calculating the loan amount & interest
Once you are ready with a business plan, you can now calculate the loan amount required to start your business. You can start by calculating the infrastructure costs and working capital for a certain period.
Your bank will start your loan repayment process after 2 or 3 years, so you must calculate the costs properly. Apart from the loan amount, you will also need to calculate the interest you will have to pay after that period and plan the repayment accordingly.
3. Selecting the bank
Even if the credit is readily available now, you will have to start repaying the interest at some point in time. Different banks offer loans at different interest rates. Before selecting the bank, you must compare the rate of interest charged by them. You will also need to compare the repayment schedule, that is, after how many months the interest will need to be paid. A deposit has to be given to the bank while availing of the loan. You will have to visit their portal for applying for a business loan online.
4. Credit score should be good
To avail of a loan in your bank account, the credit score of your account must be good. The bank officer checks your existing credit score, and if it is not good enough, it could be a problem. Credit scores cannot be improved overnight. It needs a long duration to get improvised. The bank officer may suggest you few other ways to get the loan. If your credit score is not good, you can have another account holder like your spouse or another family member for the credit and get the loan sanctioned in their name.
Also, the bank officer will check your CIBIL report, which tells him about your pending debts. If you have availed loan from any other banks and have not repaid, they will check it, and you will have to clear all doubts regarding the repayment.
5. Gathering required documents
Every loan process needs a list of documents to be presented to the banks for smooth process flow. It may include your photo ID, rationing card, Pan card, Address proof like electricity bill, IT return for last 3 years, Voter ID, etc. It will also need your business license, business place photos, bank statements, stock statements, guaranteer documents, form 8A, project report, earning proof, etc. You must get all these ready before moving ahead in the process.
You can also apply for a business loan online with these documents.
Tackle these hurdles before it overwhelms you
Getting a business loan is a lengthy process. If any of the documents are not presented, the loan file is rejected by the bank officer so, you must check all these steps before applying for your next business loan. Follow these steps to secure a business loan stress-free and get your business up and running!