Can You Get A Business Loan With Low Revenue?
Explore the options for obtaining a business loan with low revenue. Learn how to improve your chances of getting approved for a loan despite limited financials!
Almost every small business needs to borrow money from time to time for meeting working capital requirements and other needs. A business loan, therefore, becomes key to helping run a business smoothly and without a hitch.
Most good lenders, however, prefer businesses with robust revenue streams so that they have enough comfort that the money lent will be paid back and in full, with interest.
But what happens when a business has low revenue? Will a reputable lender approve a loan application for such an enterprise?
Well, this is actually not such a problem. Today, banks as well as non-banking finance companies (NBFCs) routinely lend to small businesses with low revenue at competitive interest rates.
Here is how one can go get a business loan even if the business is low on revenue.
Make A Business Plan
This is the first important step in getting a business loan. A low-income earner can impress a lender and have a loan application approved, if they have a robust business plan in place.
The business plan needs to show one’s revenue generating potential and strategy, a good revenue model and a convincing estimate of projected income. The borrower needs to show a clear picture of how they plan on repaying the loan in a timely manner so that current low revenue do not pose a hurdle.
To get a loan for a small business, the owner will need to produce income proofs, profit and loss statements and balance sheets, bank statements, proofs of incorporation and of Goods and Service Tax (GST) payments, their own personal income as well as tax statements and also proofs of addresses, both personal and business.
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Bank and other financial statements help determine the cash flows of a business and indicate to the lender if it would be safe lending to it or if the business could pose a risk of default. Moreover, these papers also help determine whether the business owner is creditworthy and whether the business plan submitted is genuine.
What also becomes important is if the business is consistently profitable or not. A profitable business will be easily able to pay off its debts and so a lender would have no problem recovering their loan and interest in time.
A healthy credit score and a good credit history, both of the business entity as well as the business owners, become important when it comes to lenders deciding upon a loan application, especially for a small business that may be low on revenue.
Most lenders assess credit scores, which is a standard business loan eligibility check. The business credit score is as significant as the business’ annual revenue itself, as it is the best indicator of past repayment record.
So, a business with low revenue but a good credit score stands a good chance of getting a business loan. A credit score of between 750 and 900 is often enough to get a loan with the best interest rates in the market.
As is evident from the discussion above, even if you own a business with low revenue, you can still avail a business loan if you have a robust business plan, a high personal and business credit score, and if your enterprise shows consistent profitability.
You should, however, make sure to approach a good lender like IIFL Finance, so that you can get the most competitive interest rates as well as important value-added services and backend customer support at no extra cost.
Moreover, the fact that IIFL Finance is one of the most reputed names in the industry means that you can rest assured that the entire process from application to repayment will be seamless and hassle-free and without a hitch. IIFL Finance offers business loans without a collateral of up to Rs 30 lakh for up to five years to help small businesses get off the ground and secured business loans of up to Rs 10 crore for as long as 10 years to help them scale up.
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