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Working capital is the lifeblood of every business regardless of its size and sector. As a business owner, you can take advantage of business loans to meet your working capital needs without sacrificing ownership stake. You have option to choose from a wide range of business loans products provided by various banks and non-banking financial companies (NBFCs).
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Working capital is the lifeblood of every business regardless of its size and sector. As a business owner, you can take advantage of business loans to meet your working capital needs without sacrificing ownership stake. You have option to choose from a wide range of business loans products provided by various banks and non-banking financial companies (NBFCs). The credit requirements and eligibility criteria differ from one type of business loan to another. You can always consider availing the business loans provided by various RBI-registered NBFCs to avoid strict credit requirements and lengthy approval process. But it is also important to avoid a number of mistakes of ensure approval and eliminate rejection.
3 Mistakes an Entrepreneur Must Not Commit while Applying for Business Loans 1) Lacking a Formal Business Plan While extending a business loan, each lending institution evaluates the enterprise’s profitability and growth prospects. The lenders even require the business owners to provide a formal business plan with the information and data required to assess the enterprise’s expenses, revenues, profit, and growth potential. You can easily get the business loan application approved by submitting an elaborate business plan. But you still need to ensure that the formal business plan depicts the projected operating cost, revenue, and growth clearly.
2) Not Paying Your Bills on Time Often entrepreneurs ignore the impact of missing bill payments, on business loan approval. While evaluating a business loan application, each lender checks if the borrower pays off various bills and utilities on time. You must pay off your account receivables, business credit card bills, and invoices regularly to boost loan approval chances. The timely payment of recurring expenses and bills will further contribute towards building a good credit track record.
3) Letting Your Funds Run Low A small business loan will help you to meet working capital needs and improve cash flow position. But the lending institution will consider both cash-in-hand and cash-at- bank while processing your loan application. If your business bank account does not have adequate balance or your funds are running dry, there are always chances that the lender will reject your loan application. You must maintain adequate cash-in-hand and cash-at-bank to convince the lender about your ability to repay the business loan. Here are some tips for small businesses to manage cash flow efficiently.
4) Applying for Multiple Loans As noted earlier, you have option to choose from a wide range of business loan products. Also, you have option to choose from business loan products provided by various banks and NBFCs. But you must remember that applying for too many business loans at a time will not improve loan approval chances. When you apply for multiple loans, the information will appear on the credit report and impact your credit score. Hence, you can easily boost loan approval chances by not applying for too many loans.
