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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

Software Engineer at GCUF

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How to Achieve Goals and Increase Your Chance of Success

How to Achieve Goals and Increase Your Chance of Success

Does it ever feel like the things you want to accomplish always end up on the back burner? If the answer to that question is “yes,” you’re not alone. Only about 33% of people consistently work toward their goals. In some cases, their goals may seem too lofty to accomplish, or else they aren’t sure how to make a plan for them.

If you don’t come up with concrete steps to take toward your goals, they’ll remain dreams. There’s nothing wrong with being a dreamer, but being able to turn your dreams into goals you can realize will help you lead a happier and more fulfilling life.

Luckily, you can realize almost any dream when you harness the right goal-setting methods.

In this article, I’ll show you how to achieve goals and get closer you success.

1. Break your dreams down into specific and measurable steps

We couldn’t talk about goal-setting without mentioning SMART goals.

SMART goals are specific, measurable, assignable, realistic, and time-related.

Specific and measurable steps are so important because if we don’t know what our target it, how can we ever hit it?

Take all those beautiful dreams you have for yourself and make them into things you can actually do. If you want to be an entrepreneur, for example, a step toward realizing your dream might be researching what you’ll need to start your business.

Find out more tips about utilizing SMART goals here:

How to Use SMART Goal to Become Highly Successful in Life

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2. Have at least one clearly defined goal for every interest and role in your life

It’s so easy to become complacent or stagnate. We often think that our careers are the only places where we need to set goals, but we aren’t only what we do.

To make the most of your life, take the approach that you’re always learning and growing in everything you do. Anything worth doing is worth doing well after all.

Set goals whether you’re sponsoring an activity for your child, taking up guitar lessons or trying to prove your worth at work.

You’ll notice that this approach forces you to constantly develop new skills. It can also be fulfilling to put more focus and value into all areas of your life— not just the ones related to our careers.

3. Align your goals with your life’s mission, purpose and passion

Take the opportunity to do some soul-searching. What is it that you want to do with this precious life of yours?

Anything that conflicts with your life’s purpose is bound to cause discontent. Staying in a bad relationship, doing a job that goes against your values, or maintaining the status quo just because it’s comfortable are not options for you.

Thinking about your goals in this way can help you eliminate things in your life that don’t serve you. This frees up mental space that you can use to do the things you care about the most.

Many of us struggle to find the time to work on our goals, but this strategy enables you to make more time.

4. Create goals that ignite your spirit and inspire you to take action

If you can’t be fired up about your goals from the start, they might not be good goals for you.

The road to success is often tough. You’re going to have times when you might feel tired or discouraged.

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You need to feel inspired enough that you’ll be able to overcome obstacles as you encounter them.

If what you’re doing motivates you to be the greatest version of yourself, you’ll be much more resilient.

5. Write down all your goals in specific, measurable detail

This is your road map for what success will look like. The more you define what you want the finished product to be, the greater the chance that you’ll reach that vision.

When you write down your goals, you’re creating a document that you can revisit to make sure you’re on track.

When you’re in the middle of trying to achieve a big goal, it can be hard to see what’s working for you. The things you write in this step will help you stay on-message as you take your goals out of your mind and into the real world.

Don’t just write down your goals and stash them away in a folder somewhere. Take the extra step to put them somewhere where you’ll see them.[1]

If you have too many goals to post on your desk, write a summary or choose one or two steps to work on for the day. Just seeing them will keep them in the front of your mind.

6. Commit to hitting each of your targets without exception

You wouldn’t have created the target if you didn’t think it was necessary. Hold yourself accountable for taking the steps to succeed.

You can always adapt your strategy or break your targets into smaller steps if you find that they aren’t attainable as you originally wrote them.

Hitting even the smallest target is cause for a celebration. It’s a step in the positive direction. Your success will make you crave more success.

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We often make excuses when we get tired or overwhelmed. Take away the option to make excuses. You will only be satisfied with the best effort from yourself.

7. Share your goals with others to motivate each other

There’s something so powerful about people sharing their goals and dreams with one another. Doing so gives voice to some part of us that could remain hidden (and therefore never be accomplished).

When other people know about your goals, they can cheer you on and hold you accountable. When people share their vision with you, you can do the same for them.

This strategy is particularly beneficial when you’re trying to develop healthy habits. Post about your workout on social media, or do a healthy eating challenge with your best friend. You’ll be less likely to slack when temptation arises, and you’ll probably encourage someone else to reach for their goals too.

8. Set a series of daily, weekly and long-term goals, complete with starting times and deadlines

Many goals never reach realization simply because the goal-setter doesn’t check their progress. People tend to forget what they set out to do, or their goal gets crowded out by other obligations.

Forcing yourself to revisit your goals at regular intervals breaks them into smaller steps and it reminds you to think about them.

Giving yourself regular deadlines for smaller tasks related to your goals also helps you reflect on your strategy. You’ll figure out what works for you, whether your timeline is realistic, and whether or not you need additional help to stay on track.

In addition, celebrating small wins helps you stay motivated. Here’s how:

How To Celebrate Small Wins To Achieve Big Goals

9. Take 10 minutes every day to imagine how great it will feel to achieve your goals

Visualization is such a powerful tool. Some of the most successful athletes, celebrities and business people take time each day to think about how success looks and feels for them.[2] Imagining that feeling of satisfaction can be a great motivator.

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When you do meet your goals, take some time to be grateful. Thank yourself for showing up and doing the work. Be grateful when the stars align properly to help you advance to the next step.

It’s not just getting to the destination of your goals that matters. How you take the journey is important too.

10. Take an action step toward reaching your goals every day

Your goals can easily get buried in the hustle and the bustle. Even the smallest step in the right direction is still moving you forward.

Keep chipping away at the work every day and before long, you’ll start to see those dreams come to life.

Maybe you didn’t start your business today but you designed the logo that’s going to go on your website and business cards. Doing that task well is going to help you so much in the long run.

Concrete actions day by day draw your dreams out of obscurity and into the realm of possibility.

Change begins today

Dreams can inspire and overwhelm us. By turning our dreams into goals that we can work toward, we increase our chances of success. Things that once seemed impossible are suddenly within reach.

It’s time to start turning your dreams into goals and your goals into realities.

Featured photo credit: Pexels via pexels.com

Reference

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