FindItMore | Have you ever wondered how to give your business that much-needed boost? Have you ever felt like extending your business but halted because of some financial obligation?
Here’s a suggestion, look for a long-term business loans.
The lending marketplace has changed a lot. Gone are the days when banks were the only lenders of loans. Alternative creditors such as reliable non-banking financial institutions have popped up, and borrowing an unsecured loan from them can serve your purpose.
There are several common things that NBFC’s and banks check when it comes to meeting the requirements for business loan. Here are 6 of the most important things to know before going for a long-term business loan:
- Loan amount –
Financial institutions will inquire about the sum you would like to borrow. While every lender as a limit, banks prefer on lending larger capitals.
NBFC’s, on the other hand, fill up the gap by providing small to medium business loans. They are also useful when it comes to long-term loans as their interest rates drop significantly as the tenor increases.
- Purpose –
While availing secured loans, the lender will want to know where you will spend the money – to expand your business, or to spend on renovation, hire a new workforce, or to pay rent.
However, in case of unsecured loans, NBFCs are not concerned about the area of your monetary expenditures. Be it short term or long-term business loans, you can avail both meeting minimal eligibility criteria.
- Credit score –
Your credit score reflects your ability to handle your finances. A credit score above the 700+ mark is considered to be dependable by financial institutions when sanctioning your loan.
Now, what if you have a bad credit score? Well, it’s easy to turn it around. Focus on making timely payment, handle your credit responsibly. Also, establish trade credit with your vendors. Ask them for invoices, which will reflect in your credit score.
- A business plan –
A business plan is an opportunity to flaunt your long-term financial and business goals. Don’t forget to include these in your business plan-
- Mission statement of the business.
- Information on owners, management, and key employees
- Target market and value proposition.
- Marketing strategy.
- Financial projection for next 5 years.
- A 2-3 page summary with the rest of your business plan.
Show the lender why they need to invest, put your future goals on a paper and you are half set for long-term business loans.
- Proof of collateral –
Collateral is an asset you can put as a fail-safe, if you can’t repay. A lender can sell off the collateral and collect the amount if you default on the loan.
Almost every bank will ask for collateral on a long-term business loan. However, famous NBFC’s provide collateral free loans. This opens up multiple opportunities to expand your business while not worrying about mortgaging any asset.
- Legal contracts and agreements –
One final and important business loan requirement – legal contracts and agreements that your company already have.
Lenders look for contracts like:
- Contracts with third parties or suppliers
- Corporate bylaws
- Partnership agreements
- Franchise agreement
- Commercial real estate or equipment purchase agreement
- Sales agreement
A company’s financial position depends on such agreements, so lenders check them before providing any long term business loans.
The whole process takes persistence and patience. And don’t worry if a lender rejects your application, there are many sources ready to provide that much-needed funding. Other than banks, there are NBFC’s like Bajaj Finserv offering plenty of convenience like flexible repayment tenor, affordable interest rates, pre-approved offers, etc.