Starting or expanding a business can be a very thrilling experience; however, it usually requires a hefty amount of funds. Whether you are an entrepreneur or an established business owner, a significant amount of funds is necessary to manage daily expenses, start a new project, hire new employees, maintain inventory, and much more. If you do not have enough savings or investments, a suitable way to deal with these financial restrictions is applying for a business loan. With a business loan, you can run operations, invest in new projects, buy equipment, and fulfil many other business requirements easily. In this article, we will help you with a step-by-step guide on how to apply for a business loan.
Steps to Apply for a Business Loan
The process of getting a business loan might be confusing for many, as it involves several important steps. Follow the below-given steps to easily navigate the complexity of the business loan application procedure and secure a good business loan deal:
Step 1: Assess Your Loan Requirements
Assessing your loan requirements is the most important factor an applicant must consider before applying for a business loan. Do a personal assessment and determine whether you need funds for expansion of the business, operational expenditures, equipment acquisition, or cash flow improvement.
One should have a clear understanding of the purpose for which they are applying for the loan; this helps them in making an informed decision and also helps them in choosing an appropriate loan amount as per their needs.
Step 2: Choosing the Right Lender
Once you have examined your business loan requirements, the next step is to choose a reliable lender that meets your business loan requirements. Let’s have a look at the types of lenders available that can meet your loan requirements:
Banks: Traditional banks usually offer a range of business loans. To apply through banks, individuals are required to make a personal visit to the bank, and a bank representative will assist them. The traditional method of loan application is often time-consuming and requires lots of paperwork.
Non-Banking Financial Companies (NBFC): NBFCs are also an excellent option for securing a business loan. This NBFC loan approval process is comparatively faster.
Online lenders: Online lenders are known for their speed of loan approvals compared to other lenders. They offer a simple, user-friendly application procedure, can process loans quickly, and also provide convenience as their online platforms can be accessed from anywhere anytime with the help of the internet.
When picking a lender, do consider some essential criteria like loan terms, interest rates, charges, customer service, and market reputation.
Step 3: Determine the Loan Amount and Tenure
After you choose the lender, it’s time to determine how much loan amount you want to borrow and for what period. Let’s understand more about the loan amount and loan tenure:
Loan amount: Figuring out the exact loan requirements before you approach any lender is very important. Doing this helps eliminate unnecessary fund borrowing and also saves individuals from paying high interest on an amount they never required.
Loan Tenure: Loan tenure is the term within which the borrower has to clear their debt. A longer loan tenure often has low EMIs and a higher interest rate, and vice versa.
Individuals can use a business loan EMI calculator to help them determine the right loan amount and loan tenure according to their needs. This calculator helps individuals make an informed decision that aligns with their finances.
Step 4: Gather the Required Documents.
Different lenders have different documentation requirements, but, in general, you would need to provide the following:
- Identification proof like Aadhar card, Passport, etc.
- Address proof like utility bill, rental agreement, etc
- Business registration documents like GST registration.
- Financial statements like income tax returns, balance sheets, and profit & loss statements.
- Last six months’ bank statements.
- Personal and business credit score report.
Step 5: Submit Application
Once you have all the documents ready, now it is time to apply. Depending on the lenders you choose, you can apply either online or offline. If you are applying online, visit the official website of your lender and fill out the application form, upload the required documents, and submit. Usually, most online lenders provide a user-friendly interface for loan application and document submission.
Step 6: Verification and Approval of Business Loan
After you have successfully submitted the loan application, the lender will check your data, verify the documents, and assess eligibility according to your credit score, business performance, and financial history.
The verification process and loan disbursement duration differ for every lender. Traditional processes often take much time, and online processes usually take less time. Once the verification is successful, the loan amount will be disbursed to the applicant’s account.
Conclusion
Applying for a business loan might seem complicated to many; however, with the right steps, users can easily navigate the process and secure the best business loan for themselves. When applying for a business loan, make sure to assess your loan needs, select the lender, and collect the required documents. Lastly, to make the right financial decision, you can always consider using a business loan EMI calculator.
