Factors That Determine Your Business Loan Approval

Growing a business can be just as rewarding as challenging it is. Businesses need funds to expand, contend, advance and evolve in a dynamic market. Nowadays, business loans are one of the best ways to expand your firm, whether to a new location or within the current setup. You can even get a collateral free business loan in India. However, certain factors determine your business loan approval.

What is Business Loan?
A business loan enables customers to borrow money from financial institutions for investment in the business. The amount borrowed through this channel must be repaid with interest over time.

Types of Business Loans:

• Secured Business Loan
A secured business loan is given in exchange for a personal guarantee or the pledge of assets as collateral.

• Unsecured Business Loan
Unsecured loans do not require the borrower to provide any collateral to the financial institution. Unsecured business loans are based on an applicant's credit score, financial statements and income, among other factors.

In addition to the above, business loans are further divided into sub-categories. Working capital loan, start-up loans, invoice financing, equipment financing, and overdraft are also different forms of business loan.

            Also Read: Most Important Things To Include In Your Business Loan Application

Benefits of Availing of a Business Loan:

No Collateral Required
If you opt to go for an unsecured business loan, you can save yourself the hassle and stress of offering collateral to avail the loan. Usually, meeting the eligibility criteria is enough to borrow funds. This form of loan is a boon to startups and small companies with limited funds.
 
Tax Benefits
A business loan's interest is often tax-deductible. Before you apply for a business loan, double-check the interest rate and eligibility.

Customised Loans
Business loans can be customised as per your specific needs. If you want to start a new business, you can go for a startup loan. Similarly, a working capital loan could aid in the acquisition of raw materials. Thus, loan seekers have a variety of options to choose from, depending on their needs.

Quick Disbursement
Business loans usually need minimal paperwork and are disbursed quickly so that business activities do not have to be halted while waiting for funds.

            Also Read: 6 Things You Should Know Before Refinancing Your Business Loan

Factors Determining Your Business Loan Instant Approval

1: Age of the borrower
An easy business loan approval is directly related to your age. It is difficult to find a lender willing to lend a business loan to someone younger than 25-year-old or above 60 years of age. The age of the borrower is a crucial factor as it determines the repayment potential.

2: Income
If you have been in business for more than a year, you must produce proof of your business's income. A business with a good profit figure gets instant business loan approval. However, if you want a loan for new business without security, your business plan and growth strategy will determine your loan approval.

3: Credit History
Your credit history plays a crucial role in an instant business loan approval. Your credit history defines your credibility and ability to repay a loan amount. So, if you are thinking of taking a loan soon, try to keep up with your current loan payments.

4: Cash Flow
Most lenders will be hesitant to lend you money if your company's cash flow is inadequate. Therefore, you should maximise your cash flow through efficient cash management and controlled spending.

5: Business Plan
A business model with an attractive sales projection reflects your repayment capability. It gives the lender an idea about your business goal. However, you should always be prepared with a proper business layout with details such as how much capital the company requires and where would you like to invest money. In addition, you must have all the necessary documents to meet the eligibility requirements.

            Also Read: A Quick Guide To Finding The Right Loan For Your Business
 

 

Eligibility Criteria for the Business Loan
You must meet certain requirements to acquire fast business loan approval in India.

• It is necessary to have been in business for at least three years.
• The applicant's age should be between 25 and 65 years.
• Documents such as audited financial statements from the preceding three years and ITRs filed for at least the prior year are required.
• The applicant must have a strong credit history.

How to Get an Easy Business Loan Approval?
If you meet the above-listed criteria, then applying for a business loan is fairly simple.

• You can apply in person at a branch of your choice of lender. You can also apply online by going to the website and filling out the application form there.
• Submit all the relevant documents necessary for loan processing.
• On the completion of the above steps, you can easily get the online business loan approval.

Conclusion
Business loans play a vital role in launching a startup or expanding an existing business. If you manage your funds wisely and maintain your credit history, you can get instant business loan approval without any hassles.