How to get small Business loan in Noida?

How to Qualify for a Small-Business Loan in 5 Steps

The five steps in qualifying for a business loan include building your credit scores and gathering documents.

Qualifying for a small-business loan is easier when you’re prepared. Below is a to-do list that will help you get the cash you need to grow your business.

Whether you end up applying for an SBA loan through a bank or opt for an online small-business loan, you should be familiar with each lender's requirements. Knowing whether you meet its criteria before you apply will save you time and frustration.

Here are five steps to help you qualify for a small-business loan in Noida:

1. Build personal and business credit scores

Your personal credit score ranges from 300 to 850 (the higher, the better), and evaluates your ability to repay your personal debts, such as credit cards, car loans and a mortgage. You can get a free credit score on ADITSH FINTECH.

The CIBIL score, commonly used in lending decisions, is based on five factors: your payment history (35% of your score), the amounts owed on credit cards and other debt (30%), how long you’ve had credit (15%), types of credit in use (10%) and recent credit inquiries (10%). Small-business lenders require a personal credit score for loan applications because they want to see how you manage debt.

Paying your bills on time is crucial to building your score. But even if you pay your bills like clockwork, credit report errors could be damaging your score.

Businesses that are more established and want to apply for bank loans can check out their business credit scores (which generally range from 300 to 900).

More than likely, you’ll need an excellent business credit score as well as good personal credit to qualify for an Small business loan or traditional loan from a bank; this will depend on the individual lender and business factors such as your revenue, cash flow and time in business. In general, online lenders look at personal credit scores but can be a bit more lenient when it comes to credit score requirements, as they place more emphasis on your business’s cash flow and track record.

2. Know the lender’s minimum qualifications and requirements

Meeting a lender’s minimum qualifications and requirements will make you a stronger applicant. Some lenders may offer some flexibility if you’re under performing in one area but over performing in another, but your best chance of getting approved is meeting or exceeding all of their minimums.

Borrowers typically need to meet minimum criteria related to credit scores, annual revenue and years in business. And lenders generally frown upon recent bankruptcies and other past delinquencies.

Qualifying for online lenders can be easier. Although online lenders typically underwrite loans based on traditional factors such as credit scores, annual revenue and cash flow, the loans carry less stringent requirements than Bank loans. For example, some online lenders may qualify you even without strong credit or an established business, and the lender may be more lenient with a recent bankruptcy.

Use Adiloans business loan calculator to figure out your monthly payment and compare options based on your credit score.

3. Gather financial and legal documents

Banks and other traditional lenders typically ask for a wide range of financial and legal documents during the application process. They can include:

· Personal and business income tax returns

· Balance sheet and income statement

· Personal and business bank statements

· A photo of your driver’s license

· Commercial leases

· Business licenses

· Financial projections if you have a limited operating history

These requirements can make getting a bank loan time consuming. That may not be an issue if you’re in the market for a long-term business loan to finance a major investment.

However, if you need money faster, online lenders may be a better fit, as they can provide a streamlined online application process with fewer documentation requirements and faster underwriting. If you have good credit and strong business finances, some online lenders may offer you rates comparable to those for bank loans.

4. Develop a strong business plan

Lenders will want to know how you plan to use the money and will want to see that you have a strong ability to repay. They may require a solid business plan that details the purpose of the loan and how you expect it to increase profits.

Your business plan should include current and projected financials, and clearly demonstrate that your business will have enough cash flow to cover ongoing business expenses and the new loan payments. This can give the lender more confidence in your business, increasing your chances at loan approval. Your business plan should include:

· Company description

· Product and/or service description

· Management team

· Industry analysis

· Facilities and operations plan

· Promotional, marketing and sales strategy

· SWOT analysis (strengths, weaknesses, opportunities, threats)

5. Provide collateral

To qualify for a small-business loan, you may have to provide collateral to back the loan. Collateral is an asset, such as equipment, real estate or inventory, that can be seized and sold by the lender if you can’t make your payments. It’s basically a way lenders can recover their money if your business fails.

SBA loans require “adequate” collateral for security on all loans, plus a personal guarantee from every owner of 20% or more of the business. A personal guarantee puts your credit score and your personal assets on the hook.

Some online lenders do not require collateral but may want a personal guarantee. Others may also take a blanket lien on your business assets — essentially another form of collateral — giving the lender the right to take business assets (real estate, inventory, equipment) to recoup an unpaid loan. Each lender has its own requirements, so don’t be afraid to ask questions if you are unsure.

If you don’t have collateral to get a loan or don’t want to take on the risk of losing personal or business assets, unsecured business loans may be a better option.

Also read: What are the advantages of a Personal loan?