No company starts out with the Midas touch! Even Google, which began as “Backrub” in a small Stanford dorm room, had humble beginnings. Money is essential for any business, and with the current economic challenges, the demand for business credit has only grown.
A business loan has become one of the best ways to keep a company steady and help it grow. Whether it’s investing in infrastructure, launching new products, or managing cash flow, business credit can help you scale faster. By securing a business loan, you can avoid paying business expenses out of pocket. Instead, you fund these expenses with the loan and repay it gradually from your profits.
Today, getting business credit is easier for any business type—whether you’re self-employed or running a company. Lenders now make business credit more accessible, especially for small businesses. If you’re considering a business loan, keep reading for a step-by-step guide on how to apply.
Business credit today
In the past, getting business financing meant going through a long application process, strict credit checks, and tons of paperwork. Thankfully, applying for a business loan is now much simpler, with more relaxed rules around business credit.
These days, lenders offer helpful tools like business loan EMI calculators, so you can easily estimate your loan costs. Most applications are done online, making it super convenient. Since COVID-19, many lenders have invested in technology, adding features like interactive apps and online document verification to speed things up.
Thanks to the digital transformation and relief efforts from the Indian government and RBI, the financial sector’s liquidity issues have improved. For instance, RBI cut the policy repo rate by 75 basis points, which has helped lower interest rates on business loans.
With additional support like subordinated debt and unsecured loans for many struggling MSMEs, these measures have further eased the liquidity crunch. So, if your business needs quick funds to build financial resilience, business credit can be a smart choice.
Now, here’s how you can apply for a business loan in just five easy steps:
#1 Recognize the Various Business Loan Types
Many people think getting business credit means facing tough eligibility requirements and long waiting times. The good news is that today, it’s much easier to get business credit, with plenty of options available. You can choose the right type of loan based on what your business needs, whether it’s for expansion or buying equipment.
These are a few typical kinds of company loans:
- MSME & SME Loans: These loans are designed specifically to support micro, small, and medium-sized enterprises in their daily operations.
- Working Capital Loans: If you need funds to cover everyday expenses, like payroll or rent, a working capital loan can help, especially during slow business periods.
- Machinery Loans: This type of loan provides money specifically for buying new equipment or machinery, which can boost your production and overall productivity.
- Invoice Financing: If there’s a long wait between making a sale and getting paid, invoice financing can be helpful. Most lenders will finance about 80% of the invoice amount, charging a fee for their services.
- Start-up Loans: As the name implies, these loans are for new businesses. They offer cash to help start-ups cover their initial costs and meet their financial needs.
Once you’ve picked the right loan type, you can apply with your preferred lender. You can do this online or in person, whichever you find easier. But before applying, make sure you fully understand the eligibility requirements.
Typically, business loan applications have two sections: one for your business details and another for your personal information. Be sure to fill out all the fields correctly to ensure a smooth application process.
#2 Prepare essential documents
Have you ever wondered why getting business finance can sometimes take longer than expected? Most of the time, it’s because of a lack of proper preparation and missing documents. But when you get your paperwork ready in advance, you can submit everything on time and help speed up the process.
These days, the verification process is much easier. Many lenders offer online verification, so you can do it from anywhere. All you need to do is upload your documents in the right format. Once everything is verified, lenders will usually reach out to update you on your application status.
Keep in mind that the documents you need can vary between lenders and loan types. It’s a good idea to check with the lender beforehand so you know exactly what to prepare. Typically, you might need to provide the following:
- A completed application form
- A detailed business plan that clearly explains your company’s purpose, goals, past performance, and how you plan to use the loan
- Bank statements for the last six months
- KYC documents for the company (like your PAN card and ownership papers)
- KYC documents for the business owner (including your CIBIL score and PAN number)
- Income tax returns for the past two years
- Audited balance sheets for the previous two years
Document verification is one of the most important steps in the business loan application process, so make sure your documents are properly attested and audited as needed. Any missing or incorrect paperwork can lead to delays in getting your loan approved.
#3 Use a business loan calculator
When you’re thinking about applying for a loan, it’s important to take a good look at your financial situation and your business’s finances. Ask yourself if you can afford to pay back the loan on time. If you can, think about how much you can borrow without putting too much pressure on your finances.
One of the easiest ways to make sure your loan gets approved is to fill in the exact amount you can comfortably afford. Many lenders offer free online business loan EMI calculators. Just head to your lender’s website, enter the loan amount you want and the loan term, and the calculator will show you exactly how much you’ll need to pay each month based on the interest rates.
Also, keep in mind that your monthly income should ideally cover the loan payments, since lenders usually check your income to assess how reliable you are as a borrower.
#4 Important Elements of the Approval Process for Business Loans
Out of all the steps in applying for a business loan, getting the loan approved usually takes the longest. There are ways to speed up the process, but they often don’t make much difference. This is because loan approvals are done on a case-by-case basis, so what works for one person might not work for you.
That said, you can improve your chances by keeping a few important factors in mind:
- Type of Loan: Make sure to choose a loan that fits your needs. For example, if you only need money to buy inventory, applying for a working capital loan doesn’t make sense. Picking the right type of loan can also help you get a better interest rate.
- Business Plan: Be honest about your business’s financial health. Include everything—like past performance, your current financial situation, and your future plans. Also, explain how you’ll use the borrowed money. A detailed business plan and a good credit history can really boost your credibility and increase your chances of getting approved. You can use a business loan EMI calculator to help with your financial projections.
- Credit Score: Your credit score shows how reliable you are as a borrower. Aim for a score above 700 to improve your chances of approval since most lenders will look at it when deciding if they’ll give you a loan. If your score is lower, try to improve it before applying.
In addition to these factors, you should be ready for a personal chat with a loan officer or underwriter. They usually want to get to know you better and understand your reasons for taking out the loan. They might ask about your education, any past debts, and your sources of income. To leave a good impression, be open and honest in your answers. Speak clearly about your financial situation, and show confidence in your responses.
#5 Steps to Ensure your Loan Gets Approved Quickly
On average, it takes about 3-4 days to go from applying for a loan to actually receiving the money. This mainly depends on how well you filled out your application form. If lenders find any mistakes or missing information, it could delay or even result in a loan rejection. Since the application collects important details about you, it’s crucial to be careful when you apply. Otherwise, you might have to start the whole process over again.
When filling out the application, only request a loan amount that you know you can pay back quickly. A business loan calculator can help you figure this out. It can also help you estimate your EMIs (Equated Monthly Installments) so you can plan your finances better. Keep in mind that lenders like to see a solid business plan, so being precise about the loan amount can lead to faster approval and disbursement.
Here are some tips to speed up the disbursement process:
- Research Lenders: Take some time to find a lender that fits your needs before committing.
- Follow Instructions: Make sure you follow all the steps in the business credit application carefully.
- Communicate Openly: Keep the lines of communication open with your lender to address any potential issues.
- Update Your Records: Always keep your financial records current, especially if you have any past debts.
- Pay Off Debts: Clear any outstanding debts to increase your borrowing capacity.
- Apply Online: If you want a quick business loan, applying online is usually faster since paperless processes are more efficient.
By following these tips, you can help ensure a smoother and quicker loan experience!
Also Read: 10 Easy Tips to Reduce Business Costs
How to Apply for a Business Loan?
Applying for a business loan online is super easy and only takes five simple steps. Here’s how to do it:
- Visit the Lender’s Website
Go to the website of the lender you like and find the business loan application form. Fill it out with the necessary information. - Upload Your Documents
Upload all the required documents, such as your KYC (Know Your Customer), proof of income, and any business-related papers. - Wait for Verification
After you submit your application and documents, the lender will check everything to make sure it’s all correct. - Loan Approval
If everything looks good, the lender will approve your loan. - Disbursal
Finally, your bank will transfer the loan amount to your account within a few days.
And that’s it! You’re on your way to getting the funding you need for your business.
Also Read: 10 Easy Tips to Reduce Business Costs
Ready to apply?
Now that you know how to get a business loan, consider Tata Capital for your needs. We offer great terms on business loans designed to fit your specific requirements, whether you’re looking to buy inventory or expand your business.
Wondering how fast we can process your loan? It’s quicker than you might think! After you send us the necessary documents, we usually approve the loan online within just a few hours.
For all the details on business loan eligibility, visit our website or give us a call today! We’re here to help you get the funding you need.
