We present 5 steps to make a loan application and have it approved.
Many businesses in the MSME space periodically face a cash crunch, either to keep daily operations running or to pitch for new projects. At times, a business loan is needed to buy new machinery or invest in bigger office space.
If you need a business loan, then you need to apply for it correctly to eliminate chances of a rejection. Follow these steps:
#1 Find out the pertinent business banking solutions you need.
Leading banks in India have a separate section on business banking products and services. Click on the relevant field to find the business banking solution you are looking for, from current accounts to MSME loans. Look at the different loan products on offer and study their terms and conditions thoroughly. If certain aspects of the product are not clear to you, write to the bank or interact with their chatbot to ask your questions.
#2 Get your documents in order.
Now that you know more about the type of loan that you wish to apply for, you can study the list of documents required with it. This list normally includes your company registration papers (Professional Tax enrolment, MSME enrolment, GST certificate, Sales Tax enrolment), company bank statements for at least two years (showing the revenue flows), ITR for two years, profit and loss statements, audit reports (if applicable for your company), etc. Also download the loan application form and keep your recent passport size photographs ready.
#3 Prepare a business plan for the next two quarters.
The bank needs to study not just your financials and past business revenues, but it also needs to get a sense of your company’s prospects. This is done to ensure that your company can repay the loan as stipulated, without the chance of a default. Your current account and past loans will create a certain credit score for your company. It is helpful to prepare a business plan for at least the next two quarters to illustrate how you will generate revenues and repay the borrowing.
#4 Make the application online.
Leading banks’ business banking products in India can be applied for online. Apply for the loan online and get the application form sent to your inbox. Fill it out carefully and attach the relevant documents with the application. You will be issued with a tracking number to check the application status from time to time.
#5 Present your case to the bank.
If the bank invites you for further discussion on your loan application – this might happen in case your company is quite new, or if the credit score is low – then go to the meeting with every company-related document and latest financial information. If necessary, take your accountant along to answer any financial queries that come up during the meeting. Make a strong argument for the loan approval. If your presentation satisfies the bank, your loan request is approved.