Smart entrepreneurs look forward to boosting their bottom lines to stay relevant in a highly competitive market. As a business, you can only thrive by pursuing growth. This process demands capital. And it is where MSME loans come into the picture. These loans are a reliable financing option that will ensure an intact supply chain for you. It will help you scale up your business operations and grab a significant market share.
However, it is crucial to prepare thoroughly before applying for SME loans. And why is that so? Lenders will assess an SME loan application based on a predetermined set of parameters. Failure to do so can make loan approvals tricky, especially for new businesses. In situations like these, reliability is more important than revenue and business turnover. To help you with it, here are four smart ways to get a hassle-free SME loan approval in the first attempt.
Keep a Tab on your Business and Personal Credit Score
Businesses with decent creditworthiness have higher chances of getting their SME loan approved in the first go. So, here are the two major metrics that need to be taken care of here:
- Personal CIBIL score
- Business CIBIL rank
Here are some smart ways to improve your business credit score faster:
- Maintain a credit consumption ratio of less than 25%
- Timely repayment of existing business loans
- Maintain an impressive record of loan repayments
- Have a stable income flow
Please note that a single record of cheque bounce can make your entire business expansion plan go for a toss. So, ensure you do not leave any stone unturned to gain an excellent CIBIL score.
Prepare a Sound and Detailed Business Plan
Besides having a good CIBIL score, businesses must also persuade the lender about their funding needs and business plans. And one of the best ways to do it is by presenting a viable business plan that promises high profitability. Here are some essential factors that must be a part of a sound and promising business plan:
- Overview of the company
- Business goals
- Market analysis
- Demand metrics
- Cash flow projections
- Revenue projections
- Loan capital usage
Apart from this, lenders also look for an experienced and capable team at the helm of the business. A realistic business plan with robust management can boost your chances of getting a loan approval faster.
Although, lenders have impressively simplified the SME loan documentation process for their borrowers. But it still plays a crucial role in demonstrating their financial capabilities and business reliability.
Moreover, these documents also indicate their ability to repay loans on time. Therefore, businesses must gather all the required documents beforehand to avoid delays later. Here is a list of documents that are a must while applying for an SME loan:
- Identity proof – Voter ID, Aadhaar Card, Passport, etc.
- Financial documents – Bank Statements, IT Returns, Balance Sheets, P&L Statements, etc.
- Address proof – Lease Agreement, Electricity Bills, etc.
- Business documents – Registration documents, PAN Card, GST Returns, etc.
Businesses that are going for collateral loans need to submit collateral documents and mandatory ones. They can also consult the banking officials for more clarity.
Understanding the SME loan Eligibility Criteria
Last but not least, businesses must understand the SME loan eligibility criteria to prevent instant rejection. According to the experts, an ideal business loan eligibility criteria revolves around business turnover, annual income, and the applicant’s age. To make things simpler, we got some common eligibility requirements for you:
- At least three years of business vintage
- A good CIBIL score
- The age of the applicant must be in the range of 25 to 65 years
- IT Returns for at least a year
This process will help businesses understand where they stand when applying for an SME loan. Apart from this, they should also try to understand different business loans and identify the ones tailored for their needs.
So, these were the top four proven ways to speed up your SME loan application process. Make sure you understand the eligibility criteria to prevent complications at the later stages. Moreover, maintaining a good CIBIL score can also make things smoother for your SME loan approval process. Keeping all the relevant documents and a promising business plan in hand will also help you get through the approval process faster.
New businesses can also get in touch with market and finance experts to understand the different SME loan options. Right guidance, a robust business idea, and a zeal to excel can help businesses smoothly get through the approval process. Lastly, businesses should also be cautious when selecting the right lenders. Comparing the top lenders and their loan offerings is a wise way to get the best MSME loan at the most effective rates.