Business Loan Application: Dos and Don’ts

Fuelling business growth while protecting your finances from sudden shocks, business loans are a crucial part of your success journey. Be it supporting your start-up with much-required initial investment or pushing your business to the next leg of growth by funding expansions and machinery, business loans can help you grow in multiple ways.

However, as effective as business loans are for your growth, their application process is equally complicated. Applying for a business loan requires careful consideration and strategic planning. Here are some dos and don’ts that you must attend to before you start your business loan application.

The Dos of Business Loan Application

Here are a few things that you must do as you apply for a business loan to fuel your next leg of growth with financial assistance:

1. Thoroughly Assess Your Business Needs: Before applying for a business loan, conduct a comprehensive assessment of your financial requirements. Understand the purpose of the loan, whether it’s for working capital, equipment purchase, expansion, or other specific needs. This clarity will guide you in choosing the right type of loan that aligns with your business goals.
2. Create a Solid Business Plan: Lenders look for a robust business plan that can show good returns on investments. This is because it proves your capacity to repay the business loan on time with your revenue. A good business plan must include your business’s mission, objectives, target market, competitive analysis, and financial projections.
3. Compare Lenders: Explore various lending institutions to find the one that best suits your business’s needs and business loan repayment capacities. Along with exploring varied eligibility criteria and interest rates from different lenders, you must also scrutinise other factors like processing fees, prepayment charges, and customer service reputation.
4. Consider Seeking Professional Advice: Consulting with financial advisors or business loan experts can provide valuable insights into the application process. They can help you navigate the complexities by ensuring that you make informed decisions that align with your business’s financial capacity and goals.
5. Prepare a Foolproof Application: Ensure that you are providing accurate and complete information regarding your business, financial plans, tax returns, and other information required by the lender when working on a business loan application. Thoroughness and attention to detail reflect positively on your credibility as an applicant.

The Don’ts of Business Loan Application 

Certain factors could put you in a negative light in front of the lenders, creating doubts about your credibility and repayment capacities. Therefore, you must be careful not to do the following things when applying for a business loan:

1. Only Apply With One Lender: It is quite common among loan applicants that they apply with multiple lenders to increase their chances of getting a swift approval. However, this approach can impact your credit score negatively, thus resulting in disapproval of your business loan application. The wisest approach is first to find out different lenders’ qualification criteria and apply strategically for the two or three options that you’re most likely to qualify for.
2. Do Not Ask for More Than You Need: While it may be tempting to secure a larger loan amount, borrowing more than necessary can lead to unnecessary financial strain. Assess your needs realistically and borrow an amount that you can comfortably repay without jeopardizing your business’s financial stability.
3. Pay Attention to the Terms and Conditions: Read and understand all terms and conditions of the business loan agreement carefully before proceeding. One must pay close attention to intricate details like interest rates, repayment schedules, penalties for late payments, and any other clauses that may affect their financial obligations. Seek clarification from the lender on any unclear terms before signing any documents.
4. Do Not Ignore Your Financial Health: It is wise to maintain transparent and accurate financial records for your business as you apply for a business loan. This not only aids in the loan application process but also demonstrates sound financial management to potential lenders, instilling confidence in your profile.

Ignite the Success Spirit with the Right Lender

As important as it is to create a foolproof and clear business loan application, it is crucial to take it to the right lender like Tata Capital. Lenders must maintain full transparency in the process as they are willing to address any doubts or queries you might have regarding your business loan application process.

Tata Capital realises that each business is unique and has a dedicated team to offer bespoke solutions catering to individual needs. Trusting the right lender will ensure your business success and improve your financial health.