Talking about Business loans, itís never easy to anticipate if your loan application is going to touch the skies or taste the dirt on the ground. However, like every unforeseen situation in life, you can always prepare for the worst-case scenario of Business loan. Here are few things you can do to boost your chances of getting your business loan application approved on the first try.
Credit score: Credit score, also known as CIBIL score is the eligibility of an applicant to borrow a loan. The borrower is evaluated based on certain factors and then assigned a score, the same is used by lenders to determine the applicantís eligibility to borrow a loan. For a first-timer, the credit score can be -1 or 0. Plus, in order to acquire a loan, the applicant must have a credit score equal to or above 750.
Debt report: Every financial mistake that you commit can be hard to get away with, because someone- the credit rating agencies, are keeping an eye on you and registering your mistakes. So, take it like walking on fire, youíll have to plan your every step to save your feetís from burning. Plan and avoid committing mistakes like loan default, failing to clear your credit card dues on time, missing EMI payment against your loan and etc. These things add to your credit history and create problems for you later, while you try to obtain a loan.
Low cash flow: Low business cash flow can be a decisive factor for your business loan application. Low cash flow lowers the business loan eligibility of an applicant and drastically reduces the chances of application approval. Thus, you will always have to ensure that your business income always exceeds your business expenditure by a clear margin.
Third Party defaults: If you act as a guarantor for a someone, who, in the end, fails to repay the loan then it will be the factor that affect your business loan eligibility. So, if you ever plan to act as a guarantor for someone, think again and make sure you trust this person more than yourself to repay the loan without any issues.
Low collateral: For a Business loan scheme that requires a collateral, your application can face rejection if you low collateral or restricted collateral.
Existing debts: If your business is already a customer of multiple financial loans, the chances are your business has a high debt burden. This affects your businessís capability to repay the loan and your application gets rejected.
Lack of business plan: Plan your repayment strategy before you plan to apply for a loan. If you have done that already, make sure you have a convincing business plan that reflects the practicality of your repayment strategy.