How To Nail Your Business Loan Pitch

Pitch plays a vital role in getting a business loan approved. Here are the 4 tips to make a perfect business loan pitch which the lenders can’t reject!

2 Aug,2022 12:42 IST 90 views
How To Nail Your Business Loan Pitch

An entrepreneur or a business owner comes across several occasions when they need instant money for their business, but may be short on cash. In such a situation, their first instinct would be to get a business loan, as doing so is easy and hassle-free. And if they have a good credit score, they can even get a loan at very attractive interest rates.

Moreover, business loans can become absolutely critical as the operations of the enterprise can depend on having adequate financial resources to meet both short-term and long-term requirements.

But how does one go about making that perfect pitch for the loan a business requires, so that there is little chance of it getting rejected by a lender?

There are four main things that can help entrepreneurs or prospective borrowers make that perfect pitch.

Have documentation in order

A business loan can either be an unsecured loan, which doesn’t require collateral, or a secured debt, which needs a security. In either case, the prospective borrowers must keep their documents in perfect order.

Lenders will ask for documentation on the business, its finances, tax returns, any other debt or liabilities it may have, the personal income tax returns of the owners, address proof, KYC documents etc.

If the applicant can provide all the documents to the lenders’ satisfaction, that’s half the job done. Any missing documents can have a detrimental effect on the loan application, and it can even be rejected. So, sound documentation is critical to getting a business loan.

A robust business plan

To make a good impression on the lender or anyone else, in general, the business owner or entrepreneur needs to put in place a robust business plan. The business plan needs to talk about some of the following aspects:

a) The complete project pipeline, and what has been executed so far;
b) The marketing and customer acquisition plans;
c) A comprehensive budget plan for the business as a whole;
d) Any red herrings and disclosures that may be important for the lenders to know.

The last point is especially important because no lender would want to be surprised after the loan has been disbursed. In fact, any material non-disclosure of an important piece of information can potentially lead to trouble ahead, including legal hassles, which are best avoided.

Good cash flow

If there’s one thing that reputed lenders look for in a business, before lending, it is the cash flow position. Inadequate cash flow can become a major irritant for lenders, as it indicates that a business could find it difficult to repay the loan and the interest over time.

A good lender will always assess the liquidity of the business and will look at ratios like the current ratio as well as the debt service coverage ratio, which will give them an idea about how well your business can repay the debt.

Typically, these ratios should be 1 or as close to it as possible. A lender will also assess the business’ current liabilities including other loans, salaries and bills, as well as current assets such as inventory, short-term investments and receivables from clients.

Good credit score

A good credit score is an absolute must to secure a business loan at an attractive rate of interest and easier repayment terms. To have a good credit score, prospective borrowers must make sure to avoid loan defaults, repay the loan and interest in time and in full. In addition, any negative feedback from customers, previous lenders, vendors or suppliers can also affect the credit score and affect the new loan approval process.

Conclusion

Most banks and non-bank finance companies (NBFCs) offer business loans, and many even provide a hassle-free approval process. But no lender would approve a loan if it is not convinced about the borrower’s reputation, intentions or repayment capacity. So, the onus of convincing the lender is on the borrower.

It is important, therefore, for you to make a strong pitch for the loan so that the lender sanctions the capital your business requires.

So, you must keep your documentation in order, make a robust business plan, and ensure a good cash flow and credit score. Once you have satisfied these conditions, you should approach a good and reputable lender like IIFL Finance that has well-laid-out procedures for disbursing business loans.

In fact, IIFL Finance has made the entire process online and seamless. It also offers you flexible repayment options, competitive interest rates and loans for varying amounts for a variety of purposes that can help your business grow.

Most Read

Franking and Stamping: What’s the difference?
14 Aug,2017 03:45 IST
34819 views
Like 1950 1950 Likes
How To Get A Personal Loan For A Low CIBIL Score?
21 Jun,2022 09:38 IST
16473 views
Like 138 138 Likes
What is equitable mortgage home loan?
8 Mar,2019 05:15 IST
11783 views
Like 2217 2217 Likes
What Is The Meaning Of E-Mandate For Mutual Funds?
23 Oct,2018 04:15 IST
9195 views
Like 1289 1289 Likes

Get in Touch