Common Mistakes to Avoid When Applying for a Business Loan

In summary

Check these points before applying for a business loan to avoid common mistakes.

• Confirm the lender’s eligibility criteria.
• Keep all required documents ready.
• Check your CIBIL score and resolve errors.
• Compare lenders before applying.
• Borrow only what your business needs.
• Review the APR, fees, and repayment terms.

For a Bajaj Finance Business Loan, verify your eligibility and documents before submitting your application.

The most common mistakes are not checking eligibility, applying with a CIBIL score below 650, applying before the business is 3 years old, submitting incomplete documents, applying to many lenders at once, and borrowing more than the business needs. Check each point before you apply.

1. Not checking the eligibility criteria

Check the criteria before you apply for a Bajaj Finance Business Loan. You must be an Indian self-employed applicant aged 21 to 80 years, and 80 or younger at the end of the loan tenure. Your business must be at least 3 years old, and your CIBIL score must be 650 or higher.

Disbursal is subject to document verification and an eligibility check. If you do not meet a criterion, address the gap before applying rather than submitting an application that is unlikely to qualify.

2. Not having your documents in order

Keep your KYC document, PAN card, and proof of business ownership ready. Accepted KYC documents may include Aadhaar, a passport, a voter ID, or a driving licence. Bajaj Finance may request additional financial documents based on your application, such as bank statements and income tax returns.

Check that each document is complete, legible, current, and consistent with the details in your application. If a document is expired, incomplete, or contains a mismatch, correct it before submitting your application.

3. Applying with a low CIBIL score

A CIBIL score of 650 or higher is needed to apply for a Bajaj Finance Business Loan. Check your score before you apply. If it is below 650, pay EMIs and credit card dues on time, review your outstanding balances, and correct any errors in your credit report before applying again.

You can request your credit report from a credit information company. RBI directions require each credit information company to provide one free full credit report every calendar year. Review the accounts and details shown in the report, and raise any errors with the relevant credit information company or lender.

4. Applying for too many loans at once

Each application may lead a lender to access your credit report, which is recorded as an enquiry. CIBIL says an enquiry usually has minimal impact on your score. However, applying to several lenders at once can make offers harder to compare and track, and may create unnecessary enquiries.

Compare the eligibility criteria, APR, fees, repayment schedule, and loan features first. Apply to one lender at a time after deciding that its criteria and terms suit your business. 

5. Borrowing more than your business needs

Borrowing more than you need increases the amount you must repay and can raise your EMI and total interest cost. Estimate the expenses the loan will cover, using quotations, invoices, or a cash-flow forecast where relevant. Avoid choosing a larger amount simply because it is available.

The Bajaj Finance Business Loan range is Rs. 2 lakh to Rs. 80 lakh, with a tenure of 12 to 96 months. Check the current offer and calculate the EMI before deciding how much to borrow. The amount offered depends on eligibility and assessment.

6. Overlooking the APR, fees, and loan terms

Do not compare loan offers using the interest rate alone. Review the annual percentage rate (APR), the repayment schedule, the total amount payable, and applicable fees and charges. For retail and MSME term loans sanctioned on or after 1 October 2024, RBI’s Key Facts Statement requirements include the APR and an amortisation schedule; charges not included in the statement cannot be levied during the term without the borrower’s explicit consent. 

Fees and conditions can depend on the loan variant and applicable terms, so read the documents provided with your offer before accepting it.

7. Choosing a loan that does not match your requirement

Check whether the loan type and repayment structure fit the way you will use the funds. A Term Loan generally involves fixed EMIs on the amount disbursed. Under a Flexi Dropline Loan, EMIs apply to the amount withdrawn. Under a Flexi Hybrid Loan, interest-only EMIs apply to the amount used during the initial tenure. Confirm the exact terms in your offer documents.

A Bajaj Finance Business Loan is unsecured, so collateral is not required for this product. Do not assume that the same conditions apply to every type of business finance. Review the product details and choose a facility that matches your requirement and cash flow.

The Bajaj Finance Business Loan criteria specify business vintage of at least 3 years, a CIBIL score of 650 or higher, applicant age of 21 to 80 years, and self-employment.

Bank statements and income tax returns may be requested, and you still need to assess whether your business cash flow can support the EMIs. Use the EMI calculator before applying.