With several lending institutions extending lump-sum financing, availing a business loan has become significantly convenient today. The simple eligibility and document requirements laid down by business loan companies only make these advances accessible to many small and mid-sized ventures. These advances come with attractive features like high-value financing at competitive rates, tenure flexibility, multiple repayment options, and the likes, that make them feasible for borrowing businesses.
Lenders, nevertheless, need to see whether an individual would be able to afford the loan and make timely repayments. To confirm this, they verify several applicant details and inquire about the same, assessing the risk involved. You must be well aware of the lender inquiries that would come your way when availing a business loan. Let’s check them out one by one.
Your Business Plan
Before applying for a loan, you must have a business plan ready related to future goals and expansion plans. A detailed plan in place allows business loan companies to assess the risks involved more appropriately.
Credit Score – Both Individual and Business
A credit score is a three-digit numeric indicating the creditworthiness of an individual or a business. It lends critical insight into the credit history as well as the financial habits and discipline of an individual. The score ranges between 300 and 900, whereby a score higher than 750 is always preferable, and necessary in the case of unsecured loans.
When assessing business loan applications, lenders enquire applicants about their credit score as well as that of the business to estimate the creditworthiness and risk of lending.
Although business loans are usually unsecured advances, availing funding of significantly high value would require you to provide collateral. When availing such financing, the lender enquires about the collateral availability, whereby any business or personal asset cans serve as security for raising funds. In the case of unsecured business loans, minimum eligibility requirements must be met by the applicant to apply for the advance.
Reason for Financing
When assessing a loan application and verifying feasibility, the lender also enquires with the applicant regarding the purpose of availing the advance. Thus, before applying, you must have a plan ready as to what you want this financing to fulfill. It can be anything, from operating expenses to immediate cash shortage, new asset purchase, skilled hiring, and business expansion.
Loan Quantum Needed
You would also be required to provide the maximum loan estimate needed for the purpose of fulfilling your funding needs. This information should be mentioned right when you fill up the loan application form along with other pertinent details like a suitable tenure, business income, and the likes.
Details of Business Finances
Alongside, the lender would also need to have a detailed idea of the business finances for the past few years. Such an idea represented by the business’s balance sheet and other financial statements allows the lender to cross-check business stability.
You must also have a repayment plan in place that should help you project the revenue sources which shall be allocated towards EMI payment to ensure timely loan repayment without any default or delay.
Business loan companies also require applicants to provide proof of business ownership and stability to ensure suitable borrowing. You must thus keep all the plans ready and arrange the necessary documents before applying to complete loan verification successfully.