A Complete Guide to Applying for Business Loans

A Complete Guide to Applying for Business Loans

Ready to expand your business this Diwali but confused about how to manage finances? It’s understandable, but you can manage this with easily accessible Business Loans. Borrowing funds is easy with new-age NBFCs like Clix Capital. ,

A Business Loan is important to fund business expenses or to grow. The qualifications for a Business Loan can be based on both cash flow and revenue. Cash flow financing is ideal for organizations that generate significant sales but don’t have much collateral to offer. Revenue-based financing is ideal for companies with a lot of physical assets, such as equipment, that can be used as collateral for a loan.

After taking a loan, you must repay the borrowed amount and interest within the specified period. Repayment terms also differ with the types of Business Loans you borrow. This article provides an ultimate guide on business loans and how you can apply for them.

Process of Applying for Business Loans

Below are the steps on how to apply for a Small Business Loan:

1. Find a Reliable Loan Provider

The first step in applying for Business Loans is selecting an appropriate financial institution.

An ideal financial partner offers –

  • The loan amount and interest rates, as per your needs.
  • A convenient repayment term.
  • Quick sanction of Business Loans.

2. Choose the Type of Business Loan You Want

One of the most important things you need to do before applying for a loan is to choose the type of Business Loan you want to borrow.

Types of Business Loans include –

  • Secured Business Loans
  • Unsecured Business Loans

Secured Business Loans are loans backed up with some kind of collateral. On the other hand, unsecured Business Loans do not involve collateral.

3. Be Ready With All the Essential Documents

The next step for applying for loans is ensuring you have all your documents while applying for a Business Loan. The primary documents mandatory while applying for your loan are :

  • Completed Application Form
  • Passport-Size Photograph
  • Address proof (Aadhar Card, Passport, Voter ID, Driving License, Last 2 months Utility Bills)
  • Identity proof (Aadhar Card, PAN Card, Government ID)
  • Financial documents (PAN Card of Firm, Company or Applicant, GSTIN, 6-month bank statement, Copy of the most recent ITR form along with computation of income, audited balance sheet and profit & loss account for the previous 2 years, Proof of continuity of business of 3 years)
  • Proof of ownership
  • Current additional financial obligations

Keeping the documents ready will help you apply for loans easily. Correct documentation will also help you get your loans sanctioned quickly.

4. Submit The Financial Statements Of Your Business

Financial statements indicate the condition of your business. You must provide them with the financial documents mentioned above while applying for the loan. With your financial statements, the financial partner will evaluate whether you are eligible to get a loan.

The financial partner has to be convinced that your business is developing and the cash flow is stable. If the cash flow is not stable or is negative, it will lead to problems in getting a Business Loan sanctioned for your business.

Providing Collateral

After knowing about the type of loan, choose the one you want and provide all the required documents plus collateral (in case of a secured Business Loan) to support your loan. If you cannot repay the loan within the stipulated time, the financial partner will take the collateral as compensation. So, going for an unsecured Personal Loan is a better choice when you have the sales but do not have large physical assets.

Reviewing Process

After submitting all the documents and filling up the application form, the next step is reviewing your application and documents.

After you submit the required documents, the financial partner will review your application before sanctioning the loan.

They will determine the risks and benefits of giving you a loan. In addition, they will also analyse whether you can repay the loan within the stipulated time.

After you qualify the eligibility criteria for the loan, the financial partner specifies the amount they have fixed for the loan, business loan interest rates and the repayment terms and conditions. Make sure the terms and conditions are flexible enough for you to repay the loan on time.

5. Receiving the Loan and Repaying It

After receiving the loan and using it to enhance your business, you must repay it within the stipulated time.

Ensure to adhere to the terms and conditions written on the agreement you signed. Please do not pay the loan too early or too late, as you may have to pay additional fees.

To Wrap Up

The steps listed above can help you smoothly avail of a Business Loan. Since Business Loans are essential to enhance and stabilise your business, they become an ideal choice for modern-day entrepreneurs.

Now that you know the steps to apply for a Business Loan, you can start planning your next business expansion or marketing without hesitation.

Clix Capital is the right platform for you when you want unsecured Business Loans. They provide Business Loans on flexible repayment terms.