In this era of industrialization, every type of business has to take loans to make their projects successful and in this case, banks and financial institutions play a very crucial role.
The majority of business loans given by financial institutions are unsecured types and hence to make sure that the borrowers repay the loans in a timely fashion, certain things need to be checked and collected.
- Usually, the financial institutions need to see the borrower’s credit history (collateral, capacity, capital, character, and conditions) to be precise. If any business fails to fulfill any one of the criteria, then getting a small business loan approval can be really tough. It’s natural for lenders to be concerned about the repayments and so they’ll keep a close watch on your personal and business credit scores as well.
- Lenders generally give loans to individuals or businesses whose credit score is somewhere between 700-750. A positive credit score indicates a good credit history and the assurance that the borrower is capable of repaying the loan amount within the given time frame. Unfortunately, if your CIBIL is anywhere less than 680 then it’s a sign of poor credit history and lenders wouldn’t be willing to give loans as they will look at you as a potential threat.
- Cash flow in your business is considered to be another important parameter to decide whether you are qualified to receive a small business loan or not. Unfortunately, if your business features lower cash flow then you are again rejected as a qualified borrower by financial institutions and banks alike.
- Banks and financial institutions might also ask for a guarantee to be sure that you will be able to repay their loan; they are actually looking to reduce the risk that’s involved with loan repayment. If you have any property or jewelry, then you can present that as collateral for the loan and improve your chances of getting the loan request approved.
- Your lender will also evaluate your previous loan repayment history to see if you have the capacity to repay the current loan.
- Lastly, proper documents are very important. Starting from identity proof to address proof, income proof and financial documents including business ownership proof all documents showing that you are genuine and not a fraudster are very crucial.
If you are considering a business loan, a proactive and trusted financial institution like Accord Financial is worth a try.