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Questions to Ask Yourself Before Applying for a Business Loan

  • Highlights

  • NBFCs have changed the lending landscape drastically

  • Prior making a loan application, gauge the amount of money required

  • Do check your personal and business credit score

  • Find out how quickly you need the funds

The lending landscape has undergone a sea change with the emergence of non-banking finance companies (NBFCs). Today, as a small business owner you can easily avail business loans at a competitive interest rate from NBFCs. However, there are certain questions you need to ask yourself before applying for a business loan.

1. How Much Money Do I Need?

First of all, you need to gauge the amount of money you need. One of the best ways to do it is to understand your loan objective and analyse the monthly cash flow. This will give you an idea of the loan amount you need. It is essential to remain prudent while calculating the loan amount.
While a bigger amount would translate into higher EMIs, a lower amount wouldn’t serve your purpose.

What is my Credit Score?

Your credit score - both business and personal - plays a major role while procuring a business loan. This score reflects your creditworthiness. It is important to have a good credit score to assure your lender that you can repay the money borrowed on time.
However, if your credit score is poor, you can take some time to improve it before applying for a business loan. Paying your bills, EMIs, and other liabilities on time will automatically improve your credit score. Also, keep a track record of your credit statement to remove anomalies that can negatively impact your score.

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How quickly do I need the funds?

This is another important question you need to ask before applying for a business loan. The time taken in procuring the required funds can be the deciding factor between success and failure. As compared to traditional lending institutes like banks, NBFCs have somewhat relaxed lending norms with minimal documentation resulting in quick disbursal.
You may get approval within 24 hours, with funds being disbursed within 48 hours, by certain NBFCs. Business loans offered by some of the leading NBFCs have a flexi loan facility where you a pre-approved loan limit from where you can withdraw funds as and when required. You are charged interest only on the amount utilised and not the entire limit.
Answer these questions before you apply for a loan to ensure that you get one that helps you achieve your business objectives.

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