As a small business owner, you would have invested a huge amount of your money, effort, and time into expanding and growing your company. You have to work constantly to ensure that everything proceeds smoothly. For that matter, a
What Do Lenders Consider While Scanning Your Loan Application?
If you apply for a business loan as a Small and Medium Enterprise owner and your application gets rejected, it will not only affect your plans but also affect your credit score negatively. Therefore, it’s crucial to understand what lenders look for in a business loan application before you submit it. Here are a few factors that lenders examine while sanctioning business loans:
Credit History: The credit history of your business is definitely one thing that lenders would want to look at. You must be regular with your payments to all you owe. Most lenders require a high credit score to approve your loan application. With this, they want to ensure that you uphold your financial obligations and are regular with your repayments.
Revenue and Cash Flow: While scanning through your loan application, lenders also evaluate your repayment capability in the near future. That’s why they would want to see your profit and loss statements, 6-month bank statements, income computation, and other financial documents. The lenders would want to ensure that you have enough cash flow to repay the loan.
Purpose of Taking a Business Loan: When you decide to apply for a business loan, it’s crucial to have a clear idea of how you are going to use the loan amount. Once you are sure of how and where you want to use the loan, you can move forward to the lenders to approve your application. A concrete plan and purpose for your goals can influence the lenders to sanction your loan. The lenders may view your purpose favorably and persuade them to approve your loan.
Savings and Capital: Any cash, capital, or savings you have for future investments can have a positive impact on your loan application. The lenders view those savings as a guarantee of loan repayment. It shows to your lender that you are dedicated to your business plans. Your savings will be viewed as a safety net for the borrower as well as the lender and go a long way in getting your loan approved.
Tips to Get Your Loan Application in Order
After understanding what lenders look for while scanning through your loan application, here are a few tips that can help you get your loan application in order:
Check the Eligibility Conditions: Before you submit your loan application, check the lender’s eligibility conditions and ensure that you are eligible to apply for their business loan. If you do not fulfill their eligibility requirements, they will reject your loan application straight away and that will negatively affect your credit score. For Clix Capital’s business loan, you need to fulfil the following eligibility conditions:
-
- Minimum 21 years of age at the time of loan application
- Maximum 65 years of age at the time of loan term end
- Any of the following types of business:
-
- Proprietorship
- Private limited company
- A partnership firm in services, trading, or manufacturing
- Closely-held non-listed company
-
- Minimum turnover of ₹ 1 crore
- Minimum 3 years of business history in the current work area
- The majority of business routed via banking system, reporting audited financial statement for the last 2 years, or capturing turnover in the last year through GST returns
Â
Collect the Needed Documents: Certain documents are required for verification purposes. Clix Capital need the following documents only:
-
- Completed loan application form
- Passport size photograph
- Identity Proof, which may be your Aadhaar Card, PAN card, or government ID if you are a government employee
- Address Proof, which can be your Aadhaar Card, passport, driving license, voter ID card, or utility bills for the last 2 months
- Proof of Ownership
- Financial Documents, which include the following:
-
- PAN Card for a firm, company, or individual
- GSTIN
- 6-months bank statement
- Copy of the most recent Income Tax Return form
- Computation of income, audited balance sheet, and profit & loss account for the last 2 years
- Proof of continuity of the business of 3 years, which can be your sales tax certificate, establishment, ITR, or trade license
Ensure a Good Credit Score: They also go through your credit report to check your money management skills and financial habits. If your credit score is less than the acceptable number, improve it first to avoid loan rejection.
Industrial Experience: Small business loans are offered to small businesses, not startups. You must have industrial experience of at least 3 years before you can get loan approval.
Prepare Properly: Before approving your SME loan, lenders would want to ensure that you are fully prepared for your business and are clear with the purpose of applying for the loan. Before approving your loan application, they want to check why you want to take the loan, how would you use the loan amount, and are you able to repay it on time.
Provide Correct Details Only: Pay attention to each and every detail while filling up your loan application form, especially the license number, contact details, business address, and URL, etc. A single spelling mistake can create discrepancy and make the lender susceptible.
Clix Capital is a reputed NBFC that offers a varied range of financial solutions, including business loans, home loans, and personal loans. At Clix Capital, we meet your working capital as well as long-term business needs through our exclusive SME loans. You can apply for our collateral-free business loan and ensure timely access to funds in times of need.
For any queries, find us on Facebook, Instagram, LinkedIn, Twitter, or WhatsApp
You can also reach out to us at hello@clix.capital or call us at 1800 200 9898
