There comes a time in every small business’s journey when it needs to look outside its vaults for finance. But it is one thing wanting a loan and quite another actually qualifying for one. For starters, it isn’t easy finding the right loan for your business. Having done that, being eligible and thereafter qualifying for it is a separate issue.
Here are six points to start with, which you need to check before applying for a loan. These are guidelines that could help you make your path easier in securing a small business loan.
- High Business Credit Score
Check your credit score. It should come as no surprise that businesses with a higher credit rating have a greater chance of qualifying for a small business loan. Having said that, a low credit rating can also get you an SME loan, but it may come with a higher interest rate and not necessarily the loan amount you had planned for.
- Minimum Qualifications of Small Business Lenders
Each lender, whether a bank or an online lender, do have a few criterion when they extend a line of credit to a business. To qualify for a business loan you might be required to share your bank details, existing debts, income, and assets, etc. This allows the lender to understand your financial strength and thus arrive at a loan amount figure which you will qualify for. It also helps the lender decide whether you are worthy of giving a loan to.
- Get Your Paperwork in Place
Before you apply for an SME loan ensure all the required documents are in place. Business agreements, bank statements, tax returns, PAN card, Aadhar, etc. are some of the common documents that every lender will ask for no matter how complacent their lending policies.
- Small Business Plan
Know what you will do with the extra funds. Have a business plan ready. Lenders are people too and they will get impressed by someone who has a clear-cut strategy and knows exactly how the money will be utilized. Although, how you use an unsecured business loan is your discretion and not the institutions. This will also ensure you are prepared with answers to questions the lender could ask about your business model, your future plans and your competitive advantage over others in the market.
- Promising Personal Resume
You need to impress the lender, not just with your business plan, but with your own resume. Of course, you can’t change your profile. Present facts, but put them across in a professional manner that makes it easier for you to secure that loan. The lender needs to believe in you and trust that the investment is not fraught with risk.
- Provide Collateral
There are two types of small business loans – secured and unsecured. A secured loan gives a lower rate of interest but asks for collateral, while an unsecured one does not require any collateral, but might charge a higher interest rate.
To know more about unsecured business loans, you can visit: www.smecorner.com