A business loan is a highly effective credit product availed by entrepreneurs for establishing and expanding their business. Business loans are usually secured loans and hence borrowers are required to pledge collaterals while availing a small business loan. Nowadays, with increasing financial institutions and online loan providers, availing a business loan has become far more convenient. Moreover, leading banks and Non- Banking Financial Companies (NBFCs) also provide you the option of customizing your loans according to your requirements. There are certain aspects like your credit score, source of income, etc. that financial institutions take into before approving your business loan. It is important to take care of these factors for hassle-free loan approval. Failing to which, there are chances that your business loan application might get rejected. Mentioned below are some of the common hurdles that you may have to overcome while availing a business loan:
Poor credit score
Your credit score plays an important role in your loan approval. A poor credit score affects your repayment capacity, thereby hampering your chances of loan approval. Outstanding loans, late payments of EMI and unsettled debts may lead to a poor credit score. On the other hand, a high credit score will not only increase the chances of your loan approval but also make you eligible for business loans with competitive interest rates. Therefore, make sure you have a good credit history before applying for a personal loan. By managing your finances wisely, you can successfully improve your credit score.
Inability to pledge collateral
Since a business loan is usually a secured loan, loan-providers will ask you to pledge collaterals against the loan amount. If you fail to repay the loan, lenders may seize your valuable assets pledged as collaterals to get back the loan amount. The maximum loan amount will also depend on the value of your collaterals. In case you don’t possess any asset that can be used as loan security, your business loan application may be turned down.
Absence of a Detailed Business Plan
Before approving the business loan application, lenders may ask you to show them your detailed business plan. A well-crafted business plan includes all the estimated expenses such as your staff salary, inventory and machinery purchase cost, etc. Moreover, the business plan should also include the scalability, market size, competition, product development and marketing strategy of the business. A comprehensive business plan will ensure the lender about your seriousness towards your business and also help them estimate the scope of profit in the future. Unfortunately, some entrepreneurs fail to understand the importance of a well-defined business plan, which results in the rejection of their business loan application.
Too many applications
Applying for a business loan with too many lenders reflects negatively on your credit score. Therefore, you should compare various loan offers online and apply for the one that best suits your needs.
Insufficient Cash Flow
While evaluating the business loan application, lenders check the cash flow of the business to ensure the monthly repayment of the loan. Therefore, if your business has less cash flow at the time of applying for the loan, it may lead to rejection of your business loan application. Therefore, it is essential that you evaluate the cash blow of your business carefully before applying for a business loan.
Taking care of all these aspects while applying for a business loan can enhance the chances of your business loan approval. While availing a business loan, you should make sure that all your documents are duly checked and do not have any faults. This is because faulty documentation may also lead to the rejection of your business loan application. Moreover, to increase the chances of approval, applicants should check their loan eligibility beforehand by using an online business loan eligibility calculator.
With leading financial institutions, you can avail a business loan with minimal documentation. Moreover, it is possible to avail the loan amount within a short span of time. Business loans available at Bajaj Finserv Markets come with competitive interest rates and other attractive features such as instant approval, quick disbursal, and a hassle-free application process. Moreover, applicants can also calculate their EMI beforehand with the help of an online business loan calculator. This enables them to make timely repayment of their business loans. All these features give Bajaj Finserv Business Loans an edge over other financial institutions.