How Difficult Is It To Get A Business Loan?

First of all, let us know what are the types of loans. As such, there are two big types of loans, secured and unsecured loans. Depending on your need and ability to repay, you can decide which loan to take. A secured loan is one, in return for which you have to keep a guarantee, such as a house, property or car. If the customer is unable to repay the loan, then the lender will take possession of that guarantee.

At the same time, there is no need to give a guarantee for an unsecured business loan. Both have their advantages and disadvantages. There is another type of debt, which is called Angel Investing. In this, a person or group of people invest their money as a business loan.

Now let’s move to those factories, who decide how difficult it is to get a loan for the business. If this is your first-time experience in the business, then lenders will hesitate to give you a loan because there will be some risk in recovery of money. If your company is doing well in business and it has been a while, then it becomes easy to get a business loan because the profitability and viability of the business model itself tells its story.

Talking about the business model, it is also important that your business should stand up for itself. He should have a bright, proven USP that can withstand competition. For example, unless you do something new in the telecom sector or e-commerce sector, it will be difficult for you to get a loan.

It is not just the reasons for internal factors that make it difficult or easy for the business to take loans. There are many external reasons also, like when you need a loan, how is the economic situation of the country at that time. If the economy is growing rapidly and businesses are booming then it is easy for any business to get a loan.

But if the condition of the economy is poor, then other factors like need, proposal, business plan and relationships with lenders, from whom you have already taken loan, help you in getting loan. One more thing, it is important to have a CIBIL score. If it is above 715, then you can get a great loan.

Apart from this, documents also play an important role in getting loans. The completion of these documents is necessary, so that your loan application is not rejected. You will need these documents for a business loan.

– Those documents should show the financial health of the company.
– Balance Sheet, Profit and Loss, Audit Reports, VAT Returns of last 3 years. If you want a loan in 2020, you can show reports from 2016 to 2019.
– Current performance, estimated turnover, should be written on the company’s official letterhead.
– Basic documents like existence and address proof. It is important to be self attested.

1. KYC – Know Your Customer: Incorporation Certificate, Partnership Deed, Establishment Certificate.

2. PAN Cards: PAN cards of owners, promoters and business entities.

3. Address Proof: Address proof of owners, promoters and business units.

4. You can also show Aadhaar card, driving license, voter ID as address proof.

– Bank statement If you are taking a loan for the first time, then a bank statement of 9-12 months. If the SMEs have more than one bank, then the statement should have a 75 percent turnover.

It is interesting to note that most businesses only look for these loans and prepare paperwork and run around in panic when there is a dire need of money. It should be done that before applying the loan, prepare the document so that it is easily found.

So at the end of the article, we come to the same conclusion that the condition of the economy, the type of business and the stage at which the business has reached, relationship with the lender, CIBIL score play a very important role in getting a business loan.

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