The number of unsecured loans in India grew at a CAGR of 27% between 2015 and 2018. The main reason behind this growth is the number of small-scale industries, which are availing external finances in the form of business loans to fund their expansion projects.
Financial institutions have simplified the business loan application process so that individuals can avail such credits with ease. There is various business loan app available which provides you instant loan but all the need is to meet the eligibility criteria for it. However, they must be aware of a few points to avail the loan with the most favorable terms they can be eligible for.
Things Must Know Before Availing Business Loan:
Here is a list of things an individual should know before they apply for a business loan.
- Maintain A High Credit Score
A credit score is one of the most crucial eligibility factors to avail a business loan. As it is an unsecured type of credit, financial institutions determine the repayment capabilities of an applicant with the help of their CIBIL score. A rating of 750 or above is considered ideal.
Individuals can avail credit on favorable terms if they have a high CIBIL score. Financial institutions also can reject a loan application if a borrower does not have an adequate rating.
- Check The Eligibility Criteria
Along with a high credit score, applicants also need to meet the required eligibility criteria to avail a business loan. It may differ from lender to lender, but the essential criteria are here as follows –
- Applicants must be aged between 23 and 55 years.
- They must have a business vintage of at least 3 years.
- They should file IT returns for their business at least the previous year.
Apart from these, few lenders may require borrowers to meet some specific criteria. Individuals can check the details on the online loan app of the lenders.
- Keep the Required Documents Ready
Borrowers are required to submit a few essential documents along with a form to complete the application process. Lenders approve the application only after verification of the documents. The list of the required documents is mentioned below-
- KYC documents
- Business proof
- Financial records
- Bank account statement of the previous month
- Passport-sized photographs
- Maintain Low Fixed Obligations To Income Ratio
Fixed Obligations to Income Ratio (FOIR) is another parameter used by lenders to determine the repayment capacity of applicants. It is determined by calculating all the fixed debt obligations of an individual every month without including the statutory deductions. Borrowers should try to maintain a low ratio before they apply for a business loan to avoid rejection.
Tips For Easy Approval Of A Business Loan
- Apply For A Loan Below The Eligible Amount
Borrowers should select the loan amount carefully when they apply for a business loan. A high loan amount can increase the risk factor for the lender and subsequently reduce the chances of approval. Also, a high loan amount increases the financial burden on the borrower as it will increase the EMI amount. Borrowers can use an eligibility and EMI calculator available on quick loan apps provided by various top lenders to determine the most suitable loan amount for them.
- Develop A Repayment Strategy And Choose A Tenor Accordingly
A loan tenor can have a significant impact on the total cost of a loan. If a borrower opts for a higher loan tenor, they will have to pay a considerably less EMI amount, but it will increase the total cost of a loan.
On the other hand, a short tenor considerably increases the burden of EMIs. They should avail such credits from a lender that offers flexible loan tenor to suit their repayment strategy.
Bajaj Finserv is one such financial institution that provides flexible loan tenors ranging from 1 year to 5 years. Borrowers can log in to the Bajaj Finserv Experia App and apply for a business loan easily. Bajaj Finserv App also provides pre-approved offers on such credits to reduce the time required to avail them and simplify the process. Pre-approved offers are valid on various financial products and services, including home loans, personal loans, business loans, etc.
The points mentioned above should be able to provide a clear idea regarding the business loan application process. However, borrowers must ensure to compare the interest rates from various lenders before availing such credits.