How To Get Approved For A Small Business Loan

Mar 12th 2024
Loan
Tips to Get Approved for a Small Business Loan

To guarantee that operations operate smoothly, company owners require ongoing funding. They do, however, consider a company loan because the capital amount might be substantial. For these loans to be approved, company owners must go through several stages, which might complicate the loan application process. As a result, lenders have created a loan product where the amount is pre-approved and made available to business owners to acquire quick cash.

Pre-approved loans are made available by lenders to qualified applicants with a strong financial history.  All you have to do is fill out and deliver a preliminary application for a business loan to your lender, who will check your credit history and possibly give you an offer. If a lending company is aware of your financial situation, they could also present you with a pre-determined, pre-approved loan amount.

Benefits of Preapproved Business Loans

There are several benefits of taking a preapproved business loan:

  • Attractive interest rates

No specific company expense is covered by pre-approved business financing from a lender. But as long as the money you're borrowing is for a legitimate company cost, everything will be OK. You can thus choose to take out a pre-approved loan to finance your demands for working capital, the payment of employee wages, or business development.

  • Faster loan disbursal

Pre-approved loan offers increase your chances of receiving loan cash quickly. Why? Since the loan has already been accepted and will arrive in your bank account quickly.

  • Covers all types of business expense

No specific company expense is covered by pre-approved business financing from a lender. But as long as the money you're borrowing is for a legitimate company cost, everything will be OK. You can thus choose to take out a pre-approved loan to finance your demands for working capital, the payment of employee wages, or business development.

Eligibility Criteria For A Preapproved Business Loan:

The eligibility criteria for a preapproved business loan are:

  1. The business must have been in operation for more than six months as of the application date.
  2. A minimum annual revenue of Rs 90,000 in the three months preceding the application.
  3. The company is not on any blacklist or list of excluded or restricted enterprises.
  4. The workplace or business is not listed as a bad location.
  5. Trusts, NGOs, and charitable organizations are not permitted to apply for commercial loans.

To apply for a preapproved business loan, the following documents are required by the lenders.

  • KYC documentsIdentity proof and address proof of the borrower and all co-borrowers
  • PAN Card of the borrower and all co-borrowers
  • Last (6-12 Months) months bank statement of main operative business account
  • Signed copy of standard terms (term loan facility)
  • Additional document(s) may be required for credit assessment and processing of loan request
  • GST Registration
  • Previous 12 months’ bank statements
  • Proof of business registration
  • PAN Card and Aadhar Card copy of the Proprietor(s)
  • Deed copy and company PAN Card copy in the case of partnerships

Tips To Get A Preapproved Business Loan

Maintain a good credit score

Your CIBIL or credit score, which represents your creditworthiness and financial stability and indicates how likely you are to repay the loan, is one of the first things lenders look at. An overall favorable score for getting a pre-approved loan and making it more affordable is one over 685. Keep your credit utilization below 30% of your credit limit, refrain from applying for many loans at once, make on-time payments on your current obligations, and avoid defaults if you want to keep your credit score high.

Have excellent financial stability

Lenders base their decision to lend on your past credit history and capacity to manage debt responsibly. Incorporate previous and present financial accounts, tax returns, and audited reports to provide a transparent and thorough financial history of your company. Your case for a pre-approved company loan will be strengthened if you can show steady revenue growth and positive cash flow.

Maintain all financial documents

Keeping current financial records is essential for the loan approval procedure. Make certain that any bank or financial statements and other documentation are current and ready for review by lenders. Quick access to updated documents demonstrates your dedication to accountability and openness, which will increase your trust as a borrower.

Pick an appropriate lender

Making the appropriate lender choice might have a big influence on your ability to get a pre-approved business loan. Loan products and eligibility requirements differ between lenders. Find out about and contrast the products that different financial organizations, such as banks, non-banking financial firms (NBFCs), and internet lenders, have to offer. Select a lender whose loan offerings fit your company's demands and whose conditions are in your best interest.

Have an excellent Debt-To-Income Ratio

The financial institution will consider your capacity to repay the loan using several factors, including your debt-to-income ratio. It compares your monthly income to your entire monthly debt commitments. Keep your DTI ratio under 40% to improve your chances of getting a pre-approved business loan. Lowering your DTI ratio and increasing your eligibility can be achieved by paying off or combining your loans.

The Conclusion

Select Investkraft if you need to finance your company's operations rapidly. We provide speedy processing, flexible payback terms, and structured EMI plans for our cheap loans for the company.

Using our business loan EMI calculator, you may estimate your prospective monthly payments and the interest you'll have to pay before applying for the loan. This makes it easier for you to budget your EMIs, manage your other costs, and repay the loan smoothly.

FAQs

1. To apply for a business loan from Investkraft, should I need to provide collateral?

No assets must be pledged as security to get a company loan from Investkraft.

2.  How can I determine my business loan EMI in advance?

You may estimate the EMI for your business loan using the Investkraft calculator based on the needed amount and term.

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