How Business Leaders Can Prepare A Winning Business Loan Application Proposal

Staying ahead in a business, ensuring profit is extremely tough in today’s global operating environment. Staying profitable often requires continuous upgradation of technology and infrastructure, investment in R&D, and expansion into new markets. All of this requires financial back-up which may not be readily available from your business balance sheets and bank accounts.

Fortunately, several banks and NBFCs, such as IIFL, and others offer online business loans. The eligibility criteria for availing the business loan is far more relaxed today than in the late 1990’s. You can be as young as 25 to avail the loan if your business is at least three years old and a credit score of 750. IIFL Finance has relaxed this criteria even further for MSME loan applications. You can avail their business loan if you have a credit score of 675 and have been in business for two years. However, do keep in mind that a higher credit score usually means that you will be charged a lower rate of interest.

While the criteria for availing a business loan is significantly relaxed, preparation and submission of a sound application is crucial to the approval of your loan. One of the most important documents to be submitted is a Business Plan. But since the plan will include details of how the loan will be used and repaid, you will need to research the offerings of different lenders beforehand, as different lenders offer different terms and conditions. Most of this information is available online today on the websites of lenders. In addition, there are several sites and blogs which compare the offerings, eligibility and terms and conditions of various lenders. In general, small business loan amounts vary from INR 50,00/- to INR 100,00,000/-. IIFL for instance offers business loans up to INR 30 Lakhs, Research the repayment tenure and interest rates. Since secured loans elicit lower interest rates, decide what is the collateral you can offer, if any. This may be a personal asset or a business asset. Most financial companies will offer you up to 75% to 80% of the value of the asset pledged as loan. Once you have done your research, you can begin preparing the Business Plan Loan Proposal Document or the Business Plan.

The business plan you prepare should clearly bring out details of your existing business products and services, existing markets and sales volumes, production and procurement details, existing liabilities and assets, and cash flows. The plan document should then go on to explain the purpose of the loan and how the investment will affect future production and sales, and cash flows. This cash flow will factor in loan repayments as per the terms and conditions offered by the lender. You can use an Online Business Loan EMI Calculator available on the IIFL website to help you work out the loan term to opt for. As most lenders advertise their business loan interest rates as between a certain range, it may be difficult for you to predict the rate that you will be offered. This final rate is dependent on several factors such as your credit score, whether the loan is secured or not, the kind of business for which you have applied for a loan and the RBI guidelines. Thus, you may have to prepare two or three documents with two or three projections of repayment EMIs and cash flows.

Once this is done, you are almost set. All that is left is putting together the documents necessary to prove you meet the eligibility criteria, and filling in the online application.