An online business loanfrom a fintech lender, without collateral cover,is a useful means of augmenting the existing funds for small business units that are yet to realize significant revenues or have a reasonable operating vintage period. Lenders conduct in-house underwriting process and extend unsecured business loans to eligible borrowers, who fulfill the predetermined conditions. We shall study the steps for getting a business loaninstantly.
Important aspects to keep in mind to obtain quick business loan approval:
- Clarityof Business: This is a very important prerequisite. A business owner should have sufficient idea, prior to the commencement of the business as to the scope of the business, nature of operations, expected turnover, the investment requirements, the loan amount needed, the target customer profile, the pricing structure. This information is vital before one approaches a lender. The lender would only extend business loans to a business owner who believes in the success of his own business.
- Lender’s Conditions: This is a must. The lender would ensure that the borrower meets all the eligibility criteria before loan approval. Lenders would conduct their own evaluation of the possibility of default risk. Since NBFCs grant loans without collateral cover, they would thoroughly check the repayment capability of the borrower.
- CA views matter: An expert’s advice on the loan amount required, supported by a detailed business plan would help determine the exact borrowing need. One should refrain from blindly borrowing the amount one is eligible for as there is a cost associated with the funds.
- CIBIL Score:A good credit score is a basic prerequisite to obtaininga business loan. A score of over 750 is considered good. This means a good repayment track record.
- Business rapport withthe Lender: One must build a good, working relationship with the lender, in case the need for further business loans arise in the future. Generally, SMEs require several rounds of funding to meet the various business needs at different stages of the business. A good business rapport can help obtain add-on facilities for an existing loan as well.
- Bank Statement: Generally, lenders require submission of the bank statements of the last 6 months so as to verify the identity of the applicant and whether the business owner is eligible to receive the business profits in the applicant’s bank account. It also serves to confirm the income range of the borrower and the unit’s financial performance.
- GST Returns with financial statements: The GST returns confirm the legal nature of the business operation, the regularity of tax compliance and the revenues clocked by the business unit. The balance sheet helps the lender determine the net worth of the business and the strength of its asset base. The profit and loss statement helps gauge the profitability and repayment capacity of the borrower.
- Personal CIBIL Score: Lenders also study the credit history of the business owner in his or her individual capacity. A CIBIL above 750 is considered as good.
- It returns of Business and of Business owner: Lenders mandate documents like thepersonal tax, business tax or income tax receipts during the application process.
- Business Vintage: Generally, fintech lenders extend loans to a business unit with a minimum operating period of 3 years. This would be validated by the date of incorporation or registration of the company or partnership firm respectively. However, a lender would also extend a unit in operations for 2 years upon submission of audited financials.
- Need for Loan: The approval of the business loan is ultimately subject to convince the lender of its business requirement.
- Operating structure: The SME must disclose details of the operating structure, whether the company, partnership firm or sole proprietary concern with details of the directors, partners, their interest in the company and other director positions held.
Fintech NBFCs have stayed ahead of the curve, by the adoption of best practices in technology and enabling online application and instant approval with the digital signature facility. All of this has truly facilitated instant online business loan approval.