Check this step-by-step guide to make your business loan application process seamless!
The process of business loan application can confuse many business entities. But by following a few simple steps, you can apply for a business loan without any hassles.
In this article, we will explain the business loan application process.
There can be situations when you might need funds for your business, such as to manage cash flow, invest in new products, etc. In such cases, you can apply for a business loan to get the funds required to meet the expenses.
Getting a business loan can help you pay for various business expenses easily. Most lenders provide business loans to professional as well as non-professional business entities. However, to avail a business loan, you need to follow the business loan process of the lender.
But before understanding the application process, you must know a few things about business loans. Let’s take a look at things you should keep in mind if you want to avail a business loan.-
Understand the Different Types of Business Loans
There are various types of business loans. You can choose a loan based on your financial requirements. Here are some of the types of business loans-
• Term Loans
A term loan is a loan that you need to repay within a specific duration. The lender sets the repayment tenure when the loan application is made.
• Working Capital Loans
In order to meet everyday financial requirements, purchase goods, buy inventory, enhance business cash flow, etc., you can take working capital loans. Generally, working capital loans have short repayment tenure.
• Machinery Loans
A machinery loan can be availed to buy machinery. Many large manufacturing businesses borrow this loan. The business loan interest rates, repayment tenure, and loan amount will vary from one lender to another.
• Letter of Credit
Many trading companies take a letter of credit for business purposes. This credit can be used for export as well as import requirements of businesses.
• Micro, Small, and Medium Enterprise (MSME) Loans
MSME loans are given to MSMEs, individuals, start-ups, and other business entities. These loans can be offered as working capital loans, overdrafts, etc. Before you apply for MSME loan, you must check if you meet the eligibility requirements of the lender.
Gather the Necessary Documents
Submitting the correct documents is essential to ensure a hassle-free loan application process. You will have to submit documents like-
• Application Form
You need to enter the required details in the application form.
• KYC documentsProof
PAN card, Passport, Adhaar Card, etc.
• Financial Documents
Bank account statements, IT returns, P and L sheet audited by a CA, etc.
Furthermore, the requirement of documents might vary for professional and non-professional business entities.
Some of the documents required for non-professional business entities are-
- Identity proof of the sole proprietorship
- Income tax and sales tax returns documents
- Bank statements
Some of the documents required for professional business entities are-
- Identity proof
- Income tax returns
- Residence proof
Consider a Few Important Factors
There are various factors that lenders consider when approving a loan. In order to ensure the loan gets approved effortlessly, you must keep a few things in mind, such as-
• Provide the Correct Business Plan
Provide the correct details about the business plan to the lender. Inform the lender about how you are going to use the loan amount.
• Loan Type
Selecting the right loan type is crucial as it can help you meet your financial requirements. It can also enable you to avoid bad debt.
• Credit Score
One of the most crucial factors that will impact your loan application is your credit score. It’s recommended to build a good credit score before applying for a business loan. The higher the credit score, the higher the likelihood of the loan getting approved.
Make Use of a Business Loan Calculator Before Applying for a Loan
Most lenders offer a business loan EMI calculator on their online portals. It’s recommended that you use this calculator before applying for a loan. You can get an estimated amount of EMI you'll have to pay based on your loan amount.
Steps to Apply for a Business Loan Online
It has become easy to make a loan application as most lenders allow people to apply for business loan online. The process to apply for business loan is-
- Visit the website of the lender.v
- Apply for a business loan.
- Enter personal, financial, and business details.
- Upload the required documents.
- Submit the application.
The lender’s representative will contact you once the application is made.
You can grow your business exponentially with the help of a business loan. It can provide quick access to necessary funds and can be availed easily. However, before applying for a business loan, it’s crucial to check the lender’s requirements for a smooth process.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.