Lack of funds is one of the main reasons that innovative people with great business ideas often have difficulty completing their projects. Even after a venture expands, it will require extra funds in the future to improve its processes and pay its suppliers. In India, it is common to obtain a business loan from a financial institution. However, in the last few years, the number of small and average businesses (SMEs) have actually risen significantly, but many of those SMEs who had asked for monetary assistance are still unfinanced.
FinTech lenders are reducing the space between demand and supply of lendings. FinTech firms help business owners to maximize their business ideas by providing fast loans without security. The competition in this field is still fierce, as well as applications for business financing are still accepted on the basis of credit score.
Here are some tips to increase your chances of approval if you plan to search for business loans online and are brushing up your company venture for more success:
1) Create a cool business strategy — You need to have a liquid-drawn out company strategy before you enter a field of interest, but if it does not include official documents, then they should be prepared. A formal business strategy must include the objective of the project, how it intends to earn money, the development method and the marketing technique. The strategy should also include copies of financial statements and information about capital forecasts.
You may be asked for a solid document of revenue generation with a minimum of one year experience in business if you don’t have a primary company strategy. It is important that you confirm your ability to repay the loan amount without defaulting in order for the application to be accepted.
2) Include a written plan on the intended use of the loan — When you need a financing for business, you must also be able to tell the lender about its exact purpose. The loan provider, whether it is a FinTech company or a bank, will evaluate the credibility of your application based on the reason for which you are requesting the funding. All companies have different needs. However, the majority of lendings are made for business growth, stock or resource acquisitions, management costs, and capital expenditures. A digital lending institution can also be used to refinance old debts or pay them off.
3) Understand what type of loan will fit your needs — Even after you have explained the purpose of your loan, you may be presented with a variety of lending categories that you can search for. You should know the details of each, such as interest, duration, repayment plans, and documents needed to obtain them. Banks and electronic lending institutions categorise lending products for ease of use and monitoring. Some debt products are useful for fast funding of invoices, while others may be more beneficial to obtain stock. Contact the lender to get the best deal.
4) Check your capital forecasts — When a business does not have an excellent credit rating or a proven track record of income, they are often burdened with high interest rates on risky lending. As a result, it is important to review your capital forecasts. You need to be able to understand your ability to pay and ensure that you have the funds necessary to quickly eliminate your debt.
5) Understand the dangers that lending institutions evaluate — Both public and economic loan providers assess lending candidates based on a variety of risk. A company that is considered a “dangerous customer” is more likely to have its loan application rejected. These are the qualities that can make a business appear dangerous:
The owner’s equity is so tiny that it’s almost impossible to tell.
– Defaults on previous loans or a poor credit rating
– – Poor income profits
The market is only going to last a very short time.
– – Weak bookkeeping system
– – Doubtful Monitoring
6) Use your personal credit rating — In general, a company is an independent entity. Even a sole proprietorship is treated as a separate legal entity for accounting purposes. When it comes to securing a business loan without collateral, a good personal credit score can help you get the amount you need. Pay off any type of outstanding personal debts and credit card costs as much as you can. This will give your lender more confidence in your business and also assure them that you do not have debts. By confirming your ability to repay your business loans, you can guarantee your lendings.
7) Do thorough research study on lending institutions — If a bank or conventional lending firm has rejected a loan for your company, you should not consider it as a final option in your search for funding. FinTech firms that offer risky business lendings will examine your credit rating utilizing different criteria than those used by banks. FinTech lending institutions are more likely to provide you with the funding that you need if your business knowledge is proven. Think beyond the conventional systems as well as look for funding online using those documents that prove your ability to pay on time. Digital lending institutions also offer temporary loans, with the amount being paid in minutes after the approval of the loan application.
Online lending has revealed that obtaining a business loan does not need to be a difficult procedure for SMEs. FinTech firms are willing to provide loans and the application process can be simple. You just need to start early and collect all the documents you will require for your application.
Resources Float’s fundamental principle is that every application for a business loan will be evaluated with speed, efficiency and also favor. There are a variety of products for business lending in India that are tailored for SMEs. These include Term Financings, Online Vendor Financings, Pay Later Financings, Vendor Cash Financings, Supply Chain Financings and Taxi Financings.
