Get An Instant Business Loan. Find Out How?

How to get instant loan?

 

1. Creditworthiness 

   No matter which loan are you applying for, your credit history always plays a crucial role in determining your loan amount and rate of interest. Most borrowers think that delaying EMI payment or opting out for a moratorium does not impact their credit report. However, it is not true. Although the loan moratorium or loan restructuring does not impact your credit points, it will still reflect as 'restructured' on your credit report. It may impact your future loan eligibility. So, it is advisable to have a strong credit history to get a business loan without collateral security.
    

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

2. Business Plan

   For an instant business loan, you must always have a ready-to-show business plan with yourself. Remember, your lender will always ask for your business strategy before granting a loan to you. In your business plan, you must clarify the loan's objective, vision and aspects of how you are planning your business’s growth. This condition becomes more important if you are applying for a business loan for new business. 
    

3. Type of business

   There are various business opportunities in the market. Some involve high risk, whereas others are less risky; if you have opted for riskier business, you might have invited poor luck. If your lender views your business as risky, the processing of your loan may slow down or your lender may charge higher interest. Lenders usually consider seasonal businesses riskier. If you have a risky business, you may not get unsecured business loan. 
    

Also Read: Check Your Business Loan Eligibility
 

4. Cash Flow

   Cash flows reflect how much cash you have on hand to repay a loan. It is usually the first thing lenders look at when assessing your business’s financial health. To find out whether you have sufficient cash flow to repay your business loan without security or not, use a simple formula. Divide your business net operating income by total annual debt. By using this method, you can find out the debt coverage ratio. Lenders usually consider a debt coverage ratio of anything above 1. Anything below 1 is considered as inadequate cash flow that most lenders do not ignore. 
    

5. Income

   You must produce income proof for your business if it has been in operation for one year or longer. Furthermore, to be approved for the loan, your company must be profitable. Your income reflects your repayment capability. 
    

6. Report inaccuracies 

   Inaccurate credit reports are one of the most common reasons for business loan rejection. It is possible that your previous lender did not notify the credit bureau of the loan's closure. Thus, even if you made your payments on time, your report would show a delayed EMI and you will have a low credit score. In such a case, contact your lender immediately and request that a report be sent to the credit rating agency. You can also write directly to credit agencies, accompanied by supporting documentation such as a NOC.
    
   Make it a habit to check your credit report once or twice a year to avoid inaccuracies.
    

7. Collateral

   Business loans are available in both secured and unsecured forms. If you believe you might fall short of the lender's minimum qualifying criteria, you may consider putting a collateral down even on an unsecured term loan. Collateral provides the lender with the assurance that if you default, they will be able to recover their losses by selling off your collateral. Adding a co-borrower or guarantor to your application is another way to ensure an immediate loan approval. Applying with collateral also helps you get a favourable business loan interest rate.
    

8. Guarantor or co-applicant

   Adding a co-applicant or guarantor to your application is another way to ensure an immediate loan approval. However, when selecting a co-applicant, make sure they have a strong credit profile. Your business partner might be an excellent candidate for a co-applicant. The co-applicant is responsible for paying the loan EMIs in equal proportion or the ratio mentioned on the loan agreement.
    

9. Keep your financials in order

   Financial records help lenders understand your company's liquidity and debt position. Essentially, they inform lenders about your business’ financial performance. Some key financial documents that lenders generally require include your business’ profit and loss statements, cash flow statements, balance sheets, GST filings, and a few more. They may also request a copy of your accounts receivables and payables.
    
   If you seek a higher loan amount, it is advisable to get your financials audited by a chartered accountant. Audited financials assist in instant business loan online approval.

Documents Required for Instant Business Loan Approval 

 

• Identity Proof- PAN Card/ Passport/ Driving Licence/ Aadhaar Card/ Voter's ID

 

• Address Proof- Passport/ Voter's ID Card/ Utility Bill/ Driving Licence/ Aadhaar Card/ Account Statement/ Updated Account Passbook (no more than 3 months old)

 

• Ownership Proof- Agreement Copy / Municipal Tax Receipt/ Maintenance Bill/ Electricity Bill / Share Certificate 

 

• Business Continuity Proof- Shop or Establishment Certificate/ Service Tax Registration/ VAT Registrations/ GST Registrations 

 

• Proof of Firm Constitution- MOA/ GST Registration Certificate/ Partnership Deed

 

Financial Documents

 

• Last one-year Income Tax Return copy.
• Last six months account statement.
• Audited balance sheet and profit and loss statement for the last two years. (For existing business)

Also Read: Simplifying Business Loan Documentation
 

Business Loan Eligibility Criteria

 

• The age of the applicant should be anywhere between 21 years and 65 years. However, the lenders have fixed the maximum age limit at the time of loan maturity. The age factor may differ with various lenders.

 

• Self-employed, private limited companies, proprietors, and partnership firms working in manufacturing, trading, or services.

 

• The business should be in operation for a minimum of three years. 

 

• Business should be in profit for the last two years and should have a minimum turnover of Rs 10 lakh. This factor, however, may vary from one lender to another.

 

• Applicants should have a minimum annual income ranging from Rs 1.5 lakh to Rs 2 lakh.

 

To Conclude 

The above factors play an important role in getting a small business loan and making your loan application faster and more effective, allowing you to focus on your business aspirations. So, before applying for a loan you must check the business loan eligibility for easy approval. Having a solid understanding of the lender's standards can make the loan application process go more smoothly than otherwise.
 
Disclaimer: This post was first published on 14th June 2021 and has been updated for the latest information, freshness, and accuracy.