Mistakes to avoid when availing of business loans
Getting a business loan for your company can provide the much-needed capital and help you expand your company into new markets or industries. However, lending institutions have strict guidelines they need to meet before they approve any business loan application. If you want your application to stand out from the rest, there are some things you need to avoid doing so that your loan application gets accepted with ease.
Here are the commonly made mistakes when applying for a business loan and how to avoid them:
1. Misleading information
The business loan application is the first step in the entire process of getting a loan. If an authority is to see the information in the application you provide, it must be correct. A common mistake is misleading information in the business loan application form. For example, you may put your company's turnover as low as Rs. 4 lakh when the turnover is vice versa. This will reduce your chances of being shortlisted.
2. Not clear specifications
Another thing you need to avoid in your business loan application is not specifying the need for a loan. A bank wants to know precisely why you need their loan. Instead of just writing down the business's condition, you must also explain. If a bank is willing to grant you a loan, they are not just considering how well your business is currently performing. They are more concerned about your goals. Therefore, you must specify the need to get a loan for business.
3. Not track record
When applying for a business loan, you must have a track record of repaying loans. However, many people need a good history of past repayments to apply for a business loan, which degrades their credit scores. It is important to note that business loans differ from personal loans. If you apply for a business loan to repay it, you must have a track record of repayment.
4. Not expert advice
Many start-up owners do not hail from a business or finance background and need more expertise in managing their businesses finances. Hence, it becomes crucial for such individuals to resort to an expert for the most efficient advice that caters to their business model and will help them achieve their long-term business goals. They will also help in getting the best business loan interest rates.
5. Too many applications
It is a myth that your chances of being shortlisted for a loan increase if the number of applications increases. The business loan application form should be filled out once with utmost precautions to ensure zero errors and factually correct information.
Getting a business loan can be quite an exciting and challenging experience. However, with a little effort and perseverance, you, too, can get your hands on the much-coveted business loan.