If you think getting a business loan is difficult, you are both right and wrong. It depends on what path your take. If you go the traditional way of applying to a bank, it may take a little longer. Getting a business loan from licensed moneylenders, on the other hand, is often more time-saving and straightforward. In either case, you should fit yourself in the shoes of the moneylender. In other words, you should look at the obligatory requirements from their perspective so that they don’t disappoint you by saying ‘No’. Here are some tips to increase your chance of getting a business loan approved.
1. Maintain a steady cash flow
Most SMBs face some common challenges to getting business loan approved. Poor cash flow is a common reason for business loan rejection. It is important to take concrete steps towards improving your cash flow. Hence, find ways to keep a steady flow of cash coming into your business. Also, keep your financial statements, bank transaction details, tax returns updated, as all these documents will establish the performance of your business till date. On the other hand, all your documents should show that you are able to pay off the loan with interest as you are paying your employees on time.
2. Prepare your business plan before approaching for loan
Never go and simply ask the bank or licensed moneylender how much you can borrow in terms of business loan. This will give them a false impression of yours and they may think you have no fixed idea or track to expand your business. Don’t give any vague or general response about your plan of growing the business as it won’t work as far as procuring business loan is concerned. In case if the officials ask, your investment plan should give an impression that you are not alone. They prefer to see if you have communicated with experts in your field and hired an accountant and financial advisor at least.
3. Prepare your business plan before applying for loan
A detailed business plan shows that you have a clear idea of what you want to achieve in business within a specified timeline. This may include estimate of expenses, income and cash flow projection.