Since the pandemic has taken a heavy toll on the financial sectors, lenders and financial institutions have become skeptical about approving loan requests.
In the present scenario, most loan requests are being rejected due to various reasons, with the most common being a low credit score. With this, small business owners face disappointment as their businesses suffer due to a deficiency of funds.
To get the business loan sanctioned quickly, the entrepreneurs must follow a proper process.
Here are a few tips you can consider for quick business loan approval.
#Idea 1: Strategise your Process
You may need a loan amount for your business expansion or the inventory enhancement, but you fail on planning. Do you still believe that your loan request will get approval?
You must show the lenders your business plan to get the business loan.
- Which type of company do you hold at present?
- Is it a private limited company or a non-corporate entity?
- Why do you need the loan amount, and what is your present company turnover?
Once these questions are adequately answered, you know your business plan for loan approval is ready.
#Idea 2: The Purpose of the Loan
Lenders look into the business plan to check its feasibility and purpose.
If you have a strong business purpose, do not forget to get your lenders’ attention on it.
#Idea 3: Documentation
Business license and ownership details are mandatory to apply for business loan from a reputed lender or a financial institution. Hence, before applying for a loan or getting it approved quickly, owners should consider the importance of the documents. The financial institution will check where they will use the loan funds or if there are any challenges to getting it back on time.
#Idea 4: Financial Records in the Market:
Business loan depends on many factors. Owners should have a detailed report of the tax returns, profit and loss statement, account statement, and annual sales report.
In addition, the customer base should be strong enough, and its details should be appropriately enlisted. These are some lenders’ requirements to approve business loan requests.
#Idea 5: Check your Credit Score
A credit score is the most important aspect when seeking approval for a business loan. Check your eligibility before you apply for any business loan. If you have a low credit score, the chances are high that your business loan request will get rejected. On average, around 60% of loans get rejected due to low credit scores.
#Idea 6: Social Media Presence
Why does your business need social media presence for quick loan approval? Nowadays, social media works as a mirror for any business type. Whether a small, medium or large business, social media presence adds value to the business’s credibility. Its presence makes the chance double for getting quick loan approval.
Social media can provide a vast amount of information about the business that lenders can fetch from social postings and social accounts. Social media has become the real-time information source that provides business insights and market image.
#Idea 7: Consider the Payment Process and Apply Accordingly
If the purpose of the loan is clear, the business owners’ first inquiry should be about the payment process. The loan terms and the payment method should be thoroughly checked.
Meanwhile, the size of the business determines how easy the owner’s payment process would be. The real hardship of the rejection comes if the lenders find any disputes in the owners’ capability of repaying the loan amount.
So, it’s advisable to be careful while choosing the payment term.
#Idea 8: Choose an Unsecured Business Loan
Although business loans are easier to apply for, getting them sanctioned is not that easy as lenders may ask for collateral as security for the loan. This may prove risky for your business in case of a default.
Leading financial institutions like Clix Capital provide unsecured business loans of 5-50 lakhs without asking for any collateral. So, you can go ahead with an unsecured business loan.
#Idea 9: Loan Amount
Don’t seek an unrealistic loan amount from the lenders, as they may want to know the purpose of the loan. In that case, borrowers should have a clear vision of why they are applying for the loan and where this loan amount would be used for. Make the proper plan and seek a realistic amount from the lenders. However, not every lender seeks a detailed plan.
#Idea 10: DSCR – Debt Service Coverage Ratio
Do you have any existing debt in the market? What is your plan for the current debts? There are higher chances that a new loan request could be rejected if the debt coverage ratio is high. In such a case, you must show the lenders that you have backup to pay the existing debts and the new ones in the row. There could be chances that the lenders would ask you to decrease the borrowing amount. In that case, you can show the monthly sales report of your business to the lender.
In such cases, one significant thing is that monthly sales need to touch the higher range, and your business needs to have a good reputation in the market. Otherwise, the chances are there that the lenders would reject the application.
A better business credit score means better chances of business loan approval. Maintaining a healthy credit score for quick approval is a must.