The ultimate checklist for business loans

Given how many business loan options are available these days, it has become easier for small business owners to get their loans sanctioned. But before you can get a business loan in Delhi and other major metro cities of the country, there is a certain eligibility criteria that you need to qualify. Therefore, it makes a lot of sense to thoroughly prepare for the screening process before you actually submit your loan application.  To improve your chances of getting the loan sanctioned, you need to have a good CIBIL score and all relevant documents. Let’s take a look at this checklist.  

Application form for the business loan

Almost all the lenders have similar application forms and barring a few changes, all of them ask for the same kind of information, which, you must be able to provide to get to the next step. The information that may be required might include:

• Reason for applying for the business loan.
• Where and how the loan amount would be utilized, given that it is sanctioned.
• Business turnover.
• The type of equipment you need to purchase and the credentials of the supplier that you’re purchasing that equipment from.
• Credentials of your clients.
• Information about other businesses you own (if any).
• Information about the staff.
• Your own personal financial background

Business Strategy 

Before you can get your loan application approved, you need to reassure the lender that your business model would be successful and that you would be able to pay back the loan on time. For this, you need to submit your business strategy, which would then be evaluated by the lender. If they find it feasible, your loan application would be approved.

Liquidity status

Liquidity or cash flow is something that the lender scrutinizes very carefully before giving you the loan. If your organization has a low cash flow, it means that your repayment capacity is compromised and thus, it is risky to lend you money. Therefore, before approaching a lending institution, you need to conduct a cash flow analysis for your business. This will help you identify the issues and will give you an opportunity to fix them.

Collateral

Secured loans are disbursed more easily than unsecured. When you’re taking a loan against property, the lending institution doesn’t have to bear the risk of losing money. This way, they are more inclined to lend money to you, and in most cases, secured loans offer a much lower interest rate.

Preparing necessary documents in advance

The set of documents required by the lenders are almost the same with only slight variations. These documents are needed in order to confirm that your business is stable enough that it will be able to pay back the loan amount that it is requesting. These documents may include your business’s financial records and some of your personal documents as well.

• All business licenses and registrations
• Articles of Incorporation
• If you have any contracts with third parties, you’d need to submit copies of those contracts
• Franchise agreement
• Copy of commercial lease

• Bank Statements
• Balance Sheet
• Income Statement
• Cash Flow
• Income Tax Return documents of the previous year

Comparing your options

Once you’ve finalized that you’re going to take a loan and you’ve made all the necessary arrangements, you need to decide what lender you’re going to be taking the loan from. These days there are so many options: you can go for traditional banks, or you can go for NBFCs or DSAs. The most important thing is to consider what suits you the best and proceed accordingly.