Mistakes to avoid while looking for a business loan
Investment capital is a prerequisite for starting a new venture or expanding an existing business.
Business loans offered by various banks and other financial institutions can give wings to your idea and help you implement it in the real world.
However, there are certain prerequisites that a lender looks at before giving a loan to any business.
If you also have been contemplating the idea of taking a business loan, here are a few things you need to keep in mind while applying for it.
1. Low CIBIL Score
A CIBIL score is a certification of a borrower’s creditworthiness. While a high CIBIL score increases the probability of loan applications being accepted, low scores may have a negative impact. Hence, it is advisable to maintain a good CIBIL score through disciplined financial practice.
2. Incomplete Documentation
With an application for a business loan, the borrower must submit a series of supporting documents, including KYC-related documents, income proof, and establishment details, among others. Not having the necessary paperwork can be a big red flag for your business loan application.
3. Not Having The Business Registered
Before taking the plunge of applying for business loans, it’s important to get your venture registered. Not having the business venture is likely to lower the probability of your loan application approval.
4. Not Having A Future Road Map
Apart from the present value of the business, lenders also consider the prospects of the venture while considering a loan application. A business plan that features the vision and future of the business with market analysis and projection of revenue and profit will strengthen your application.
5. Not Being Well Versed With Loan Terms And Conditions
Before zeroing your business loan, getting through with the terms and conditions is crucial. Lenders may levy hefty processing charges and other fees while promising an apparent low-interest rate. This is likely to take your total cost of borrowing on the higher side.
Comparing business loans offered by other lenders in the market before taking the final call could help you save big bucks.
