All the entrepreneurs with businesses are always in search of opportunities to outgrow their ventures. However, a huge group of them aren’t able to do that because for various reasons. The most prominent reason is the lack of cash that acts as a barrier between them and their success. This is why most of them turn towards acquiring business loans so that they can fulfil the day-to-day essentials of the business.
Howbeit, there are certain requirements to qualify for a business loan which is why not every business owner or entrepreneur can obtain these business loans.
What Are The 5 Requirements Of Qualifying For A Business Loan?
1. Proper Business Documentation
In order to obtain a business loan, your company should have a set of proper documentation to present at the time of applying for the loan. Lenders will expect to see a business plan, the status of business existence in the market as well as industry statistics so that they can lend the money according to the condition. Business documentation might include the following listed below,
- Income tax return files
- Business bank statements
- Business licenses
- Collateral documents
- Income statements
- Financial statements
- Government Issued ID
- Business registration
- Commercial leases (if the business owns or rents a place)
2. The History Of Your Credit Bills
Before lenders lend you the loan, one of the most important things they look at it is your credit history or your credit score. A good credit score or good terms with the creditors ensure your loyalty and genuineness. If you make prompt payments to your creditors according to the payment deadlines, you will be able to repay the loan in the same manner; this is how it is perceived by the lenders.
3. Duration Of The Business
Most of the businesses that have just been launched recently or haven’t started operating as yet would find it highly difficult to obtain a loan in their initial years of operation. The least a bank asks from a company is two years of operation and service in the market to be able to obtain a loan.
4. Availability of Collateral
One more step towards making yourself eligible for a business loan is showing the availability of the collateral. To ensure the lenders about the payment of their loans if there’s a lack of money, an enterprise has to present their collaterals so that if they are unable to repay the loan, they can recover their money through cashing the business’s asset out.
5. Revenue Made Per Year
You might not be considered eligible for a loan if your business doesn’t make enough revenue per year. Moreover, if you have a lot of debt on your shoulders, you also won’t be approved and considered eligible for the loan.
Last But Not The Least,
Nowadays, to get approved for the loan is not that easy although it’s not impossible. Lenders just make sure the people they’re lending the money are the ones who will pay them back. It is important to have the most knowledge about loans when you’re thinking of borrowing one!
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.