What Are The Basic Steps To Get A Business Loan For Women?
Discover the basic steps to getting a business loan as a woman entrepreneur. Learn about loan options & tips to increase your chances of approval at IIFL Finance,
Money is essential to keep business operations run successfully. The main obstacle that stands between ideas and their execution in a business, especially for women entrepreneurs, is lack of capital. The most practical solution available to all businesswomen is to take a business loan.
Business loans not only help in the purchase of equipment, payment of vendors, payment of office rent, and employee salaries, but they also assist in establishing a good credit rating that will enable future borrowing.
Additionally, business loans have several tax advantages that can be quite useful for companies that are already making money or are about to start making money.
How To Apply For A Business Loan?
Getting a loan is easier said than done. Therefore, it is important to know the necessary steps for getting a business loan from a bank. Here are a few steps to take when applying for a business loan:
• Choose The Right Financing Option:
Before applying for a business loan, one must choose the right kind of financing. Based on the business requirements, there are different types of loans offered by banks and NBFCs. Some of these are MSME loan, machinery loan, startup loans, etc. Since all loans have different repayment terms and conditions, it is ideal to pick a financing option keeping in mind one's repayment ability and business requirement.
Another important consideration for women entrepreneurs is to do thorough research and finalise a list of banks that are likely to extend the type of loan one is looking for. Comparing different business lending options helps to get the best rate. During an ongoing loan term, keeping eyes and ears open about changes in interest rates is a great way to substitute a high-cost loan. But switching loans for better interest rates can be beneficial only if done during the early loan tenure.
• Check Eligibility:
Most lenders evaluate business loan eligibility based on credit score, which reflects the creditworthiness of an individual. Women business owners must ensure a credit score of 750 and above for loans. A low credit does not mean no loan. Lenders may approve business loans against lower credit scores but it will have higher rates of interest, resulting in higher EMIs.
The easiest way to know the loan interest rates being offered by a bank will be to use the business loan eligibility calculator. It is a digital tool available to all individuals free of cost. All one has to do is to visit the lender’s website, enter the desired loan amount, tenure and other details like income, age, credit history, financial liabilities, etc. The calculator will provide the exact amount of EMIs one will need to pay, depending on the interest rates.
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• Gather Important Documents:
A significant percentage of loan applications gets delayed, and sometimes rejected, due to improper documentation. Banks need borrowers to submit many documents related to personal and financial information. Banks weigh balance sheets, income statements, cash flow statements, etc. to appraise the financial obligation and ascertain the repayment ability of a loan applicant.
Document verification involves a considerable amount of time. Since it is an important step of loan approval and cannot be overlooked by banks, keeping these documents ready saves unnecessary trouble and speeds up the loan disbursal process.
• Submit Loan Application:
The final step to a business loan application is to submit it. It can be done online by applying through the lender's website. For those not comfortable with an online process, they can visit any local branch of the bank or the NBFC for the application form. The loan application must be duly filled.
Applicants must be careful not to furnish any wrong information as it can possibly lead to loan rejection. Along with the loan application applicants must submit all the documents that are needed to by the lender.
After the application form goes to the lender, it verifies the different parameters to check the loan eligibility. At the same time, a background check of the applicant is conducted to evaluate the repayment capability.
Once the lender is satisfied it shares the loan details and repayment terms with the borrower. If the borrower agrees with the loan terms, the loan documents are signed and the amount is credited to the applicant’s account in a few days.
Business loans available for women can be taken to buy commercial vehicles, restock inventory or for working capital loans to cover temporary cash flow problems in business. A prior knowledge of the loan application procedure improves the chances of getting the approval easily. Before seeking out a business loan, women entrepreneurs must be sure to have a business plan in place.
At the same time, the right approach is to choose the best loan type that is right for a business. Nevertheless, it does not simply end here as one needs to approach the right lending partner.
IIFL Finance, a leading financial services company of India, offers many types of business loans to suit every need of a business person. Women entrepreneurs engaged in manufacturing, trading and service businesses can easily get secured and unsecured business loans at affordable interest rates and flexible repayment terms.
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