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10 Things to Remember When Applying For a Business Loan

10 Things to Remember When Applying For a Business Loan

Precision and planning are the key stepping stones when you are planning to take a loan for your new start up or for business expansion. Different banks will have a different set of criteria and each banks’ requirements will vary. Also, while business loans are unsecured loans by nature, some financial institutions might ask you to provide some sort of collateral from your end as a guarantee. There are numerous business loans available in the market and these business loans can be used for different reasons such as purchasing equipments, vehicles or building inventory, among other things.

Just having a brilliant business idea will not help you go all the way. Your ideas will need adequate capital for successful execution. Often many startups fail to gain traction within the early years owing to the lack of financing. So, here are a few tips and pointers to help you boost your chances of getting that much-needed business loan sanctioned.

1. Prepare a business plan

The way you envision your business taking shape is the key to getting a business loan successfully. Every financial institution will ask you to submit a business plan to gain insight into how you want your business to grow and thrive.  Work on creating an attractive business plan, which will capture the interest of banks. Your business plan must reflect the confidence and faith you have in taking your business forward. Emphasize on the components of your business you wish to improve upon and what are the measures you are taking or will be taking to achieve successful execution. The purpose of the loan should be clearly elucidated.

However, it is not necessary for your business plan to be very elaborate. Your plan can be lean, crisp and short but complete with all the necessary business details along with a summarization of the company, a financial model, what your company envisages, products, the team, and how you plan to utilize the loan amount.

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2. Ensure your paperwork is in place

The importance of having your paperwork in place cannot be stressed upon adequately. If you do not have proper documentation in place, the bank can deny you the loan. This fact holds true no matter whether you are applying for a personal loan for medical expenses or a business loan to expand your manufacturing operations. It is imperative that your documents are accurate and true to facts. All your supporting documents have to be spot on, as the banks seek strong security for the loan meted out. If the bank needs collateral, you need to furnish documents that will prove your ownership of the assets you are showing as collateral. If you are showing your own property as collateral, you need to endorse your ownership over the property with the title deed, tax receipts, and possession certificate among other documents. Documents supporting your personal identity like passport, driver’s license, phone bill, PAN card etc. will be needed. Also, if the bank requires a guarantor, you will need to provide the required documents for the guarantor as well.

If the bank needs collateral, you need to furnish documents that will prove your ownership of the assets you are showing as collateral. If you are showing your own property as collateral, you need to endorse your ownership over the property with the title deed, tax receipts, and possession certificate among other documents. Documents supporting your personal identity like passport, driver’s license, phone bill, PAN card etc. will be needed. Also, if the bank requires a guarantor, you will need to provide the required documents for the guarantor as well.

In order to gauge your creditworthiness, banks will require all documents related to your credit history, whether personal or professional. So be prepared to furnish your bank statements over the previous years.

Also, some other important business documents include SSI registration, Board resolution, project report, power allocation, credit information report, IT and ST returns for 2 years, partnership deed if your company is run in partnership etc.

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3. Check the eligibility for business loans

As part of your preliminary research, you must check the eligibility criteria for applying for business loans, so that you can plan your business expansion in advance. Although the eligibility criteria vary from bank to bank, here are a few basic ones:

  • You should own the business
  • You should be aged between 21 years and 65 years
  • The business should be 3 years old in the least
  • The annual turnover of your business should be $75000
  • The minimum profit per annum should be at least $3000
  • ITR statements for the past 3 years are needed

4. Be confident of the collateral

As stated above, all banks do not require collaterals, as business loans are largely unsecured by nature. However, you must be prepared in advance when you are preparing to approach banks for business loans. Do you something tangible to show as collateral? Will it be adequate security for the loan you are seeking? Do you have all the documents in place to endorse the collateral? Have you calculated the value of the collateral? Is the collateral worth the risk? These are a few questions you need to answer before going ahead with the application for your business loan.

5. Ensure that all your business statements are reviewed

One of the essential pointers for acquiring a business loan is to make sure that whatever documents you are providing have no loopholes in them. One of the most important documents is the balance sheet.

The balance sheet enlists your latest assets, capital and liabilities. Hence your profit and loss statements over the last three years are crucial. Be systematic with keeping records. Just to be confident with your papers, and if required get your statements checked by an analyst or a chartered accountant to ensure they are sound and error-free. It is especially important to get your statements audited if the scale of your business is larger.

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6. Assess the needs of your business and seek finance accordingly

As an entrepreneur, you must have the foresight to judge your business needs. If the loan you are seeking is to meet short-term business goals, you can seek alternate financing options. Study the financing options in front of you. Assess and compare the interest rates offered and choose accordingly.

7. Judge your capacity to repay the loan

Before you decide on the amount of loan you need, you must judge your capacity to repay the loan. Talk to a financial consultant if required and learn how much your EMI will be and assess your repayment capability in accordance with it. Remember banks will only loan money to individuals or companies who have a good credit history and will not default on the EMI.

Alternately, you can use an EMI calculator to find out the exact EMI you will need to repay. Chalk your business plan in accordance with it. If required, take small steps. Take small loans to meet specific goals and repay them comfortably to ensure a steady pace of business growth rather than taking an excessive burden and putting your creditworthiness at risk.

8. Shop around to choose the best bank

The bank or financial institution you choose to take the loan from is of extreme significance. Hence do not be hasty with your decision when choosing the bank. Extensive research is crucial. Study the interest rates offered by different banks and the tenure.

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Also, if you have friends who have taken loans from various institutions, talk to them about their experiences when shopping for business loans. Know more about the goodwill of the institutions you have zeroed in upon and then read up on their guidelines and policies so that you know what to expect and what to say when you approach them. When you do your homework, it will surely add to your confidence when you present your business proposal.

9. Insurance

While the bank will check your personal credit history for ensuring the security of the loan meted out, it might also need information relating to your insurance policies, banks need to be assured that if anything were to happen to the key partners, the loan will be repaid timely.

This is especially checked for new organizations, which are more dependent on the founders and are not steady yet. So etch your business plan accordingly so that the banks find no loopholes.

10. Assess other financing options

With the rise in business startups all over the world, there is no dearth of loan options for fresh entrepreneurs. When you are stepping into the business loan market, you will see that there are is a myriad of options before you. You do not necessarily have to approach a bank or NBFCs for a loan. There is peer to peer lending that has recently been gaining traction.

There are several private organizations that specifically cater to the startup companies which seek financing. Private and individual lenders are also feasible options. However, it is better that you learn about the credibility of theses lenders before taking the plunge. Use your time efficiently to get hold of the best deals for your business needs.

Conclusion

Preparing a business plan and approaching financial institutions for a loan is not an easy task. It takes a lot of foresight to learn the needs of the hour and prepare a business plan that will capture the interest of banks as a project worth putting their money into. Be smart and crisp, and trim any unnecessary costs to present a plan that cannot be turned down by lenders

More by this author

Tanvir Zafar

The founder of ISU Technologies, passionate in writing about entrepreneurship, work and technology.

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Last Updated on November 5, 2018

20 Best Places to Work for a Great Career in 2018

20 Best Places to Work for a Great Career in 2018

Looking for a job? There’s no doubt to the fact you will want to work with a company that appreciates you for who you are.

Well, good news. The labor market today is one that has peened up with more opportunities for advancement and personal employee improvement. This is partly due to the fact that a lot of companies have been made to understand the value of their biggest assets: the employees.

To wit, here’s a list of companies- across a wide array of industries- that have been able to develop working environments that are healthy and accommodating to workers.

Take a look at these 20 best place to work for a great career:

1. Salesforce, San Francisco, California,

    Salesforce is in the information technology business and the company ranks highest due to their commitment to learning and innovation. They are ready to try new things and everyone with a new idea is always welcome to share it at the company. The company has also been known to exhibit an exceptional approach to alignment.

    Find out more about careers in Salesforce

    2. Wegmans Food Markets Inc.,Rochester, New York

      Based in Rochester, New York, employees have been known to enjoy a sense of purpose from working here. The company has been able to achieve an optimal level of engagement across all working tiers and they’ve been able to achieve great things together. They even do deliveries.

      Find out more about careers in Wegmans

      3. Ultimate Software, Weston, Florida

        Employees get amazing benefits here but that’s not the only reason why this place is so awesome to work. Whenever there is a need or a death of an Ultipeep or any of other family members, the company shows love and support like no other.

        Find out more about careers in Ultimate Software

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        4.The Boston Consulting Group, Inc., Boston, Massachusetts

          Development is at the center of anything that goes on here. The business is about people and employees are the company’s biggest asset. Employees are able to challenge the status and also leave impacts on clients.

          Find out more about careers in The Boston Consulting Group

          5. Edward Jones, St. Louis, Missouri

            Edward Jones is admired for their ability to acknowledge history without being mired down by it. The company builds on a solid foundation but there is also a level of flexibility that allows for innovation.

            Find out more about careers in Edward Jones

            6. Kimpton Hotels and Restaurants, San Francisco, California

              Kimpton is a trendsetter in the hospitality industry. The company always strives to try something different and that perspective is welcomed there at all times. Enjoy the weekends with luxury rooms, conformable mattress, furnished and well dressed service staff. A great opportunity for job seekers.

              Find out more about careers in Kimpton Hotels and Restaurants

              7. Workday, Pleasanton, California

                Newbies will find no issues with feeling welcome and at home here as this has always been a core culture component of the IT giant. Everyone is treated like family and this fosters a sense of oneness.

                Find out more about careers in Workday

                8. Genentech, South San Francisco, California

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                  Here, employees are encouraged to be themselves. There is a feeling of care, safety, and acceptance that you get here that you can’t get at many firms. The development of an all-inclusive environment has always been foundational.

                  Find out more about careers in Genetech

                  9. Deloitte, New York, New York

                    Deloitte is one of the biggest professional service providers in the world, noted for their focus on constant learning, development and improvement. They invest in their employees and are concerned about their well being.

                    Find out more about careers in Deloitte

                    10. Baird, Milwaukee, Wisconsin

                      Baird is a financial services provide that is known for adopting a “no asshole policy’ which guides the way people relate with and respect each other, regardless of their position on the company’s hierarchy.

                      Find out more about careers in Baird

                      11. Quicken Loans, Detroit, Michigan

                        At Quicken Loans, the views and opinions of everyone are respected and heard. The organization is revered for the amount of investment they put in their team members and everyone looks for ways to grow and be better.

                        Find out more about careers in Quicken Loans

                        12. Capital One, Mclean, Florida

                          Capital One has adopted a culture that encourages employees to take risks and try new things. They foster a healthy work-life balance and associates are challenged to live better lives.

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                          Find out more about careers in Capital One

                          13. Cooley LLP, Palo Alto, California

                            Cooley LLP is a law firm known for their ability to care about the company culture and being able to develop a working environment that is empowering and fun. Cooley is known to go for the best when it comes to their employees, regardless of the occasion.

                            Find out more about careers in Cooley LLP

                            14. Southern Ohio Medical Center, Portsmouth, Ohio

                              The medical center has been known for their propensity to delegate so much to their employees, thereby providing them with the ability to grow and learn on the job. In the end, you get a workplace that is all-engaging and super fun.

                              Find out more about careers in Southern Ohio Medical Center

                              15. American Express, New York, New York

                                American Express is a firm that celebrates wins, no matter how small. Everyone is made to share the same attitude towards service and the people they are to serve, thereby making people care about what they do.

                                Find out more about careers in American Express

                                16. Adobe Systems Inc., San Jose, California

                                  The culture at Adobe Systems is one that encourages employees to develop their own ideas and get a strong viewpoint. As opposed to encouraging competition, work-life balance is fostered everywhere here.

                                  Find out more about careers in Adobe Systems Inc.

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                                  17. The Cheesecake Factory Inc., Calabasas, California

                                    The Cheesecake Factory rewards dedication and hard work. Promotions come pretty easy, and there is always space for guidance to develop your experience and skills.

                                    Find out more about careers in The Cheesecake Factory Inc.

                                    18. Sap America, Newtown Square, Pennsylvania

                                      If you’re looking for a new career path, SAP might be the best bet for you. The company is adept at recognizing value and transferable skills. And you can always look for a new path while maintaining your employment.

                                      Find out more about careers in Sap America

                                      19. NVIDIA Corporation, Santa Clara, California

                                        NVIDIA is known for looking after even the smallest of things. With even a “pets allowed” policy this company accepts you for who you are, and helps you to work within your personality. Advancement is also fostered, and you are able to collaborate effectively.

                                        Find out more about careers in NVIDIA

                                        20. KPMG LLP, New York, New York

                                          Communication and progressive collaboration are the foundation of this company’s workforce treatment. Regardless of the level you are, someone is always at the ready to help and the company rewards extra effort with gratitude.

                                          Find out more about careers in KPMG LLP

                                          All in all, it’s safe to say that you will be able to find somewhere to apply your skills (whatever they are) that is all inclusive and highly accommodative. Companies today are being made to understand how much they can get when they treat their employees right and this has opened the door to an encouraging work environment for all.

                                          Happy job hunting!

                                          Featured photo credit: Pexels via pexels.com

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