Synopsis: Adequate preparation and a few simple tips before applying for a loan make a whole lot of difference in getting it approved. Here are a few simple tips to help you get your SME loan approved.

One of the essential elements that every business needs to execute its operations successfully is capital. Many of us have brilliant ideas that, if put into practice, may result in the establishment of brand-new empires. The rejection of a business loan, however, is what stands in the way of the ideas becoming a reality.

Getting a loan these days is more difficult than it was. Therefore, you must understand the procedures involved in obtaining a bank loan for a business to increase your chances of getting approval.

In this article, we will make the loan application process a little easier for you by laying down seven simple tips that you can follow to ensure that your SME loan gets approved.

Simple Tips to Get Your SME Loan Approved

When used effectively, the funding from an SME loan can increase your company’s turnover and possibly help you gain a significant market share. That being said, it’s not easy to get a small company loan approved for your business.

This is why it is crucial to thoroughly prepare yourself with a few tips before applying for an SME loan from your lender. Here are seven simple tips to help you get your SME loan approved:

1. Chalk out a solid business plan

Providing your lender with a thorough business plan is the best and most efficient approach to getting them to approve your application. Lenders will feel more comfortable lending to you if they have a clear understanding of your achievable business goals. 

A solid and successful company strategy must include the following crucial components:

  • Company’s goals
  • Demand metrics
  • Market analysis
  • Loan capital usage
  • Cash flow and revenue projections

In addition to this, lenders also look for qualified personnel to run the company. Your chances of obtaining a loan faster might be increased by having a credible business strategy and solid management.

2. Check your personal and business credit score

There is no getting around the fact that lenders will include your personal credit history when assessing your risk level as a borrower, even if you may wish to keep your personal and business money separate.

If this step of the procedure worries you, concentrate on measures to raise your credit score. According to reports, payment history (35%), credit utilization (30%), credit age (15%), account mix (10%), and credit inquiries (10%) are the five factors that make up your credit score. 

As you can see, the majority of your score is based on your payment history and credit utilization. You can raise your credit score by a few points in a matter of months by paying your bills on time and utilizing less of the credit line that has been granted to you. 

In all likelihood, if your credit score is 660 or lower, you’ll have difficulty obtaining a small business loan from a traditional lender. Lenders prefer to see scores of at least 720.

3. Convey the repayment strategy

The lender would want to know about your ability to repay the loan. So, before requesting a company loan, have a clear plan for how you will pay it back in full and within the specified timeframes. 

A strong company plan and repayment capability help maintain openness and save both parties time and effort. This will also increase the trust between the business owner and the lender.

You may also use a variety of business loan calculators to choose a loan term and an EMI amount that you will be able to comfortably repay without affecting the organization’s cash flow condition. 

4. Compare different lenders

There is a wide range of lenders and lending options available, irrespective of whether you want to apply for collateral or a zero-collateral loan. Therefore, you must select a reputable and trustworthy lender who will assist you in meeting all of your wants and expectations.

To choose one, you can start by making a list of potential lenders and creditors. And once you are done comparing the agreements and conditions of various lenders and their acceptance rates, you can choose a lender that best meets your business’s requirements.

This way, you will be able to compile a list of potential lenders who may be more likely to approve your application.

5. Plan your business application in advance

A loan application is required to secure funding for business growth and operational sustainability. You should write the business loan application in such a way that the loan provider agrees to the required amount for the company. Financial data, business records, and a profile of the business owner must all be included in the application. The documentation should be easily accessible to loan providers.

Additionally, your level of organization will have a big impact on whether or not you get a small company loan. You have to provide the lender with any information that they request as soon as possible. Being disorganized makes you appear unprepared and unsafe.

Hence, the best course of action is to over-prepare in advance. You can impress your lender with your efficiency and get control of the situation by having ready any piece of information or proof they could ask for.

6. Meet the eligibility criteria

Making it a practice to check off every eligibility requirement for a loan can help you avoid an immediate rejection and save you time, effort, and money. Usually, any business loan or long-term business eligibility is determined by the history of the business, turnover, the applicant’s age, and annual income.

Additionally, ensure that you have all the necessary documents with you beforehand. These are essential in proving your dependability and financial capacity. Your business’s records attest to both your eligibility and the company’s capacity to make enough money to repay the loan. 

Missing out on even one of the documents can lead you to instant rejection. Some of the documents that applicant’s often miss filing are: 

  • Legal documentation (articles of incorporation, commercial leases, franchise agreements)
  • State registrations and licenses
  • Business forecast

7. Maintain a healthy cash flow

Before accepting a business loan, the lender evaluates the company’s liquidity condition to ensure timely loan repayment ability. As a result, you must keep your cash flow strong and your debt service coverage ratio (DSCR) within the acceptable range.

They might check to see if your business’s profit projections are reasonable in light of market norms and your actual profits in the present and past. They might also examine if you will be able to pay your loan amount on time while maintaining a positive cash flow situation.

Additionally, apart from the cash flow projections, the lenders might ask for personal data, tax returns, and credit reports in addition to any pertinent information.

Apply for an SME loan with Protium

It typically takes two to four weeks for the loan application to be processed and the money to be disbursed after the loan provider has examined your business loan proposal. So, keep checking with the loan source frequently to get an update.

You can also apply for an SME loan application with Protium – a company developing strong, innovative financing solutions. We require little paperwork, and you can apply for a business loan digitally on your own while getting continuous assistance from our team. To know more, give us a holler at 8828827800.