Companies need funds to operate and expand its business. Owing to many companies not being cash-sufficient company particularly Micro, Small and Medium Enterprises (MSME), it becomes a need for them to look for options to source funds. Such MSMEs may approach a financial lender and get business loans like MSME loan and arrange the desired funds for the working and expansion plans of its business.
The business loans arranged may be either secured business loans whereby collateral has to be provided by the company against the business loan amount sanctioned or unsecured business loan whereby loan for business without security can be obtained.
Below stated are the few of the many preparations needed to be undertaken by the company before applying for a business loan:
1. Credit Score:
While sanctioning a business loan application filled by a company, the financial lender first checks the Credit Score of the company. Credit Score reflects the creditworthiness of the company wherein the details of the credit earlier taken by the company, its loan repayment history etc is determined.
By reviewing the credit score, the financial lender can assess the capability of the company to firstly take care of the monthly instalments and secondly repay the business loan amount.
Thus, the company must ensure that it has a good credit score while proceeding to apply for business loan. And if the credit score appears to be lower than desired, it has to be improved by paying all the debts, minimising the credit cards, etc.
2. Detailed, well-designed; well-documented Business Plan:
The business plan submitted by a company to the financial lender to apply for a business loans need to have the minutest details of the business idea that shall be implemented to achieve the desired business goals in a defined time frame.
Business plans usually help a financial lender in evaluating the viability of the business plan, its sustainability, etc. Based on the business plans presented, a financial lender decides both the business loan amount as well as the business loan interest rate.
The documentation needed to apply for business loan by financial lenders is basic. The company should ensure that all the documents are duly prepared and reviewed properly to avoid any delay/rejection in business loan.
Proper documentation would not only ensure quicker processing of the business.
4. Clearing of the Debts:
It is essential for a company to clear out its debts before applying for a business loan as debts reflect the company’s inability to pay the EMI or the repayment of the business loan.
The company ought to make sure about not having huge debts to avoid an impact on the decision of the financial lender in sanctioning the business loan application.
To conclude, the company has to review and improve its credit score, develop a robust business plan, review the documents, clear its debts, etc to get a business loan without any hassle.
1. What is an MSME loan?
MSME loans are the way for MSMEs to obtain the funds required to run and expand its business.
2. How to get MSME loan?
To apply for an MSME business loan is very easy owing to its being an online business loan, having hassle less method, bare minimum requirement of documentation.
3. Are MSME loan without collateral made available by Banks?
Yes, the majority of the MSME business loans are MSME loan without collateral.
4. Who is eligible to offer an MSME loan without collateral?
Public and Private Sector Banks, Foreign Banks, select Regional Rural Banks (RRBs), NBFCs, and Small Finance Banks.