If you are thinking about applying for a business loan, you must definitely lay a solid
foundation by building a relationship with the people from the firm that will be loaning you the amount for your business.
A lot rests on you identifying the key contacts (decision influencers) in the company and developing a rapport with them; you learn about how the company functions and the more likable and trustworthy you come across, the better your chances are of being a loan candidate. And as the rule goes – people do business with those they know and trust.
1. Be clear on the PURPOSE of your loan: Good reasons for taking a business loan
include investing in real estate/commercial space/home; a piece of equipment,
software/hardware/technology and the like; basically where the returns can be
achieved in a fair amount of time. Reasons that are absolute no-no’s include financing losses/debts or paying towards business assets that are unnecessary and will not yield anything.
2. Apply for the CORRECT amount you need: Often small businesses don’t ask for a
sufficient loan amount and this leads to applying for a second loan due to lack of
working capital, causing delays in the process. Overestimation, on the other hand, can make the lender question the business owner’s credibility and calculation. Create a budget that is supported by financial projections that are as accurate as possible and show that you’ve done your research.
3. Demonstrate your RELIABILITY: Provide correct/worthy collateral so that the lender
can judge the reliability of you, the borrower. A credit score (from CIBIL) of 650-700
is considered acceptable, but doesn’t guarantee a loan. Most banks or lenders will
prefer that you have a credit score at least in the 700-800 range.
Other factors like nature of the business you are getting into; the risks involved, the operating costs
margin – which determines your survival in the long run; and your present loan status (if any).
4. Your work/business HISTORY: Banks and lenders provide term loans to businesses
which are over 2 years old as they have a consistent record of incoming accounts. A
lender gives money based on the company’s cash flow since this ascertains the
ability to successfully repay the loan taken.
5. Prepare the PAPERWORK for your loan application: You will need to include your
business plan with profiles of all the business owners, investment details and
projections (profit & loss, balance sheet and cash flow statements) and personal
financial information as well as recent IT returns for anywhere between 3-5 years.
Remember that the lending institution will carry out checks of its own, so be sure to
have your financial particulars in order.
6. To get connected to verified loan agents, log onto getspini.com and find leads to what you need.