A loan specially projected for use for business purposes is called a business loan. It involves borrowing of cash and the creation of a debt, which has to be repaid over an agreed time- period with an added interest amount. Generally, business loans are applied for a variety of requirements like operating capital for the startup of a new business, expansion, new acquisitions, working capital requirements, vendor and dealer financing etc.
Business loans can be of different types like bank loans, mezzanine financing, invoice financing, microloans, business cash advance, cash flow loans and many others. These loans are generally provided by banks or various funding sources like finance institutions crowdfunding platforms or even from family and friends.
Prerequisites to apply for a business loan
Collect sufficient documentation
For any institution to sanction your business loan, they will need proof of your credit worthiness. This is required mainly to check your repayment capacity and how reliable you are.
Prepare a proper business proposal
Preparing a clear, thorough and professional business proposal is extremely important. The moment you decide to apply for a loan, the first thing is to plan your requirement.
Review your resources
Take a look at your credit history, liabilities, and assets, past business experiences, background before deciding on the amount of loan you need to apply for. The first thing your loan financier would want to know is about your ability to repay the loan.
How to apply for a business loan
Applying for a loan needs a lot of dedication and planning. These are a few major steps that you would need to follow during the application process-
Step 1- Identification of exact reason for applying
It is very important to state the exact reason you need the loan. There are generally good reasons to apply to business startups, growth, and expansion, developmental issues or seasonal variations, but there are some not so good reasons also like repayments of debts due to losses, acquisition of non-essential business assets etc. So it is pertinent to describe the exact reason for your need.
Step 2- The amount of the business loan
Decide and project exactly how much money you are falling short of. Portraying the correct estimate makes it much easier for the lenders to sanction your loan at the earliest.
Step 3- Identifying repaying options
The banks or financial institutes would like to know all your repayment options and the duration by which you are likely to pay back.
Step 4- Appointment and Presentation
Get together all documents and relevant papers and fix an appointment. Make a thorough and well- informed presentation based on your business plans and why exactly you need a loan.
There are many famous and well-known business loan financiers like Fintech Ltd who encourage business ventures and provide loans to all deserving and passionate business people.