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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

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Tanvir Zafar

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

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Last Updated on May 22, 2019

50 Great People To Follow On LinkedIn, No Matter Your Industry

50 Great People To Follow On LinkedIn, No Matter Your Industry

LinkedIn is an excellent platform to network with great people to help you in your career and businesses. However, with over 575 million people on the site, who should you follow? This list will steer you to the right people to follow, organized by categories of expertise.

Job Search Experts

You will likely have several jobs throughout the course of your career, and you will constantly need advice on new trends and strategies out there in the job market. Here are the LinkedIn experts who you should follow on these matters.

1. Liz Ryan is the CEO and founder of Human Workplace. Her articles on job searching are filled with creative and colorful cartoons.

2. Lou Adler is the author of The Essential Guide for Hiring and Getting Hired.

3. Dr. Marla Gottschalk will help you make an impact in a new job.

4. Hannah Morgan runs CareerSherpa.net, where she gives expert advice on job searching and how to be more visible online.

5. Alison Doyle is the CEO and Founder of CareerToolBelt.com.

Management Experts

They say that people leave managers, not jobs. These experts in LinkedIn will help you become your employees’ dream manager.

6. Jeff Weiner. How can we leave out the CEO of LinkedIn himself?

7. Nozomi Morgan is an executive coach. She can help you transition from a boss to a true leader.

8. Mickey Mikitani is the CEO of Rakuten. He constantly shares his expertise in managing a global player in e-commerce platforms.

9. Andreas von der Heydt was the head of Amazon’s Kindle Content and now the Director of Talent Acquisition. He has extensive experience in management, branding, and marketing.

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Productivity Experts

By maximizing your productivity, you can win in all aspects of life. The following LinkedIn experts will help you win big in your career.

10. Gretchen Rubin is a happiness coach and the bestselling author of the The Happiness Project.

11. Carson Tate is the founder of Working Simply. She advises us to include play in our schedules.

12. Greg Mckeown is an essentialist. Part of being an essentialist is saying no to many things so that we can focus on the things that matter.

13. Brian de Haaff, CEO of Aha! Labs Inc. provides strategies on how to be productive and happy at work at the same time.

Marketing Experts

14. Sujan Patel is VP of Marketing at When I Work, an employee scheduling software. He is an expert in content marketing and he even shares his ideas on content marketing in 2020.

15. Megan Berry is the Head of Product Development at Rebelmouse, a content marketing and AlwaysOn powerhouse.

16. Sean Gardner will help you navigate the social media landscape. This includes how to use different platforms to help accelerate your career. He is also the bestselling author of The Road to Social Media Success.

17. Christel Quek is an digital and marketing expert. She is the VP of South East Asia at Brandwatch. Their products help businesses utilize social media data to make better business decisions.

18. Jeff Bullas is a digital marketing expert. His blog has over 4 million readers annually.

19. Michael Stelzer is the CEO and Founder of social media powerhouse site, Social Media Examiner.

20. If you’re looking for inbound and content marketing expertise, follow Dharmesh Shah, Founder and CTO of Hubspot.

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21. David Edelman is a McKinsey partner and is at the helm of the Digital Marketing Strategy Practice Department.

22. Dave Kerpen leads the social media software company Likeable Local. He is the author of Likeable Social Media: How to delight your customers.

23. Clara Shih is the CEO of Hearsay Social and the author of The Facebook Era.

24. Aaron Lee is Grand Master of Customer Delight at Post Planner. He is an excellent resource for everything social media.

25. David Sable is the CEO of Y&R, one of the largest advertising firms in the world.

26. Content marketing trumps traditional marketing these days, and who else better to lead you in this area than Joe Pulizzi, Founder of Content Marketing Institute.

Personal Branding Experts

Part of what we market in our personal career is our brand. When people hear your name, what kind of brand comes into their mind? What traits and qualities do they associate with you?

Here are some personal branding experts from LinkedIn to improve your own brand.

27. Dorie Clark is the author of Stand Out and Reinventing You. He can help you craft the professional image you’ve always wanted.

28. Dan Schawbel is the managing partner of Millennial Branding. If you’re a millennial, Dan is the guy to help you craft your personal brand.

Other Notable Experts to Follow

29. Lisa Gates is the expert to follow if you’re negotiating for higher salaries and promotions.

30. If you’re a Baby Boomer, Marc Miller will help you navigate the continually changing landscape of the workplace.

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31. To avoid getting your resumé moved to the “No” pile, read Paul Freiberger’s excellent advice.

32. James Caan provides insightful ideas on careers in general. He is also a serial entrepreneur.

33. Jeff Haden writes on various topics, such as leadership and management. He is the owner of Blackbird Media.

34. If you’re looking for expert business advice on getting new customers and keeping them, follow Jay Baer.

35. Suzanne Lucas, aka Evil HR Lady, is a great human resources specialist.

36. If you need help in using Twitter to boost your career, Claire Diaz-Ortiz can guide you in the right direction.

37. Ryan Holmes is the CEO of Hootsuite, a social media management tool.

38. Customers are the lifeblood of a business and Colin Shaw focuses on revolutionizing this customer experience.

39. Brian Solis often reflects on the future of business and how technology can disrupt our world.

40. Nancy Lublin provides advice on more lighthearted topics, which are perfect after a long day’s work. She is the CEO behind Dosomething.org, a portal designed for social change; and the founder & CEO of Loris.ai and Crisis Text Line.

41. Katya Andresen provides advice on how to manage your career. She was the CEO of Cricket Media and now responsible for the SVP Card Customer Experience at Capital One.

42. Gallup has created a system to test what your strengths are and how to use them at work. Jim Clifton is the CEO of Gallup.

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43. Adam Grant is a Wharton Professor and the author of Give and Take, which provides advice on why being helpful at work can accelerate your career.

44. Hunter Walk is a partner at Homebrew Venture Capitalist Company and has specialty in product development and management.

45. If you’re running a nonprofit organization, follow Beth Kanter for expert advice on this area.

46. Emotional Intelligence is necessary to succeed in your career, and Daniel Goleman is your expert for that.

47. Rita J. King connects science, technology and business.

48. Tori Worthington Rose is a Creative Director at Mary Beth West Communications, LLC. She has extensive experience in sales and digital media.

49. If you’re looking for some advice on how to use writing and personal content marketing to boost your career, follow Ann Handley.

50. Tim Brown is the CEO at IDEO and shares his insights on Leadership and Creativity.

These are just some of the key thought leaders and movers in various industries. They will provide you with constant inspiration, as well as the willpower to pursue the career that you’ve always wanted. Their stream of expert ideas in their respective fields will help you become well-equipped in your professional pursuits.

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Featured photo credit: LinkedIn Sales Navigator via unsplash.com

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