Money is important for a business to survive and thrive. If you have a business idea and are looking to build it into a full-fledged business, you must begin by investing some capital. Once you reach some sort of stability and feel you have proof of sustenance, you can make your business grow by acquiring a business loan. But in order to do so, you must follow the below steps.
Understand the different kinds of business loans available: Depending upon your business needs, term of loan and the length of loan, you can choose from several types of business loans. The most common types of these loans include demand loans, term loans (working capital and corporate), and loan against securities, gold loans and cash-credit facility among others.
Research about the available lenders: In this current age of start-ups, banks, financial institutions and entrepreneurs are willing to lend new businesses money, now more than ever. Loans can be acquired from large commercial banks, local community banks, non-bank finance companies (NBFC) and even investors. Also, a quick google search of your credit scores can help you find sites that offer a business loan online. Banks like HDFC, Axis and Kotak Mahindra are among those that offer this loan online.
Be prepared for the lender to view your credit/risk profile: Your lenders will consider accepting or rejecting your loan application basis your credit and risk profile. A lender often looks at factors like your credit score/report, outstanding loans and cash flow, assets invested in the business, time invested in the business etc., before sanctioning the loan. He may also take a look at the other investors and your financial statements.
Get your financial statements in order: Since the lender considers your loan based on your financial statements, you must get them in order. Ensure that your income and loss statements, balance sheet and cash flow statements are thorough when you apply for business loan. The lender will analyse your cash flow, gross margin, accounts payable, debt-to-equity ratio and so on. Also ensure that these statements are audited by a certified public accountant.
Present details about your loan and specify the amount you wish to borrow: Apart from statements, you lender will also want to understand the detailed information about your business which include its name, tax ID, legal structure (LLP, LLC etc.), state filings, business plan etc. Furthermore, the lender also attempts to understand how much funding you’d require and how you intend to use the funds provided; for equipment, capital, expansion, hiring, inventory, marketing, R&D and so on.
Determine your collateral: A lender is concerned with the borrower’s ability to repay the business loan. As such, he may ask for a security interest on company assets like equipment, accounts, property, receivables etc. Some lenders may also for collaterals like property documents, while others may insist upon personal guarantee of the business owner to pass your loan.
Understand the different kinds of business loans available: Depending upon your business needs, term of loan and the length of loan, you can choose from several types of business loans. The most common types of these loans include demand loans, term loans (working capital and corporate), and loan against securities, gold loans and cash-credit facility among others.
Research about the available lenders: In this current age of start-ups, banks, financial institutions and entrepreneurs are willing to lend new businesses money, now more than ever. Loans can be acquired from large commercial banks, local community banks, non-bank finance companies (NBFC) and even investors. Also, a quick google search of your credit scores can help you find sites that offer a business loan online. Banks like HDFC, Axis and Kotak Mahindra are among those that offer this loan online.
Be prepared for the lender to view your credit/risk profile: Your lenders will consider accepting or rejecting your loan application basis your credit and risk profile. A lender often looks at factors like your credit score/report, outstanding loans and cash flow, assets invested in the business, time invested in the business etc., before sanctioning the loan. He may also take a look at the other investors and your financial statements.
Get your financial statements in order: Since the lender considers your loan based on your financial statements, you must get them in order. Ensure that your income and loss statements, balance sheet and cash flow statements are thorough when you apply for business loan. The lender will analyse your cash flow, gross margin, accounts payable, debt-to-equity ratio and so on. Also ensure that these statements are audited by a certified public accountant.
Present details about your loan and specify the amount you wish to borrow: Apart from statements, you lender will also want to understand the detailed information about your business which include its name, tax ID, legal structure (LLP, LLC etc.), state filings, business plan etc. Furthermore, the lender also attempts to understand how much funding you’d require and how you intend to use the funds provided; for equipment, capital, expansion, hiring, inventory, marketing, R&D and so on.
Determine your collateral: A lender is concerned with the borrower’s ability to repay the business loan. As such, he may ask for a security interest on company assets like equipment, accounts, property, receivables etc. Some lenders may also for collaterals like property documents, while others may insist upon personal guarantee of the business owner to pass your loan.
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