Key Questions to Ask Before Applying for a Business Loan

There are numerous business lenders on the market, each with customised business loan products and varying interest rates. As such, if you are unaware of your needs or the lending process of the lender, you will have a difficult time obtaining funds. The following post will provide you with a list of the top questions you should ask yourself and your lender before submitting your application.

Questions to ask from yourself 

Q.1. Does my business require capital infusion?

Before you send your application for a business loan, it is recommended that you first analyse your needs. Examine your business plan carefully. For example, if you are planning an expansion, consider how much of your revenue you would like to withdraw to meet the same. Request reports from different departments, such as accounting and finance, marketing, and so on. Once you have received the reports, thoroughly review them before making any decisions.

Q.2. How much funds do I require?

After you have reviewed your requirements, it’s time to decide how much money you will request from the lender. It is possible that you will be provided with a pre-approved loan offer based on your strong business credibility. The maximum amount you are eligible for under a pre-approved loan is far greater than your needs. In case you want to apply for the entire amount, you are making a mistake. Remember that unsecured business funding is slightly more expensive than secured business loans. Borrowing more than you need will only result in a debt burden.

 Q.3. What does my business credit profile look like?

This is the most important question because your credit score is essential for unsecured business funding approval. If you are not sure how to review your credit report, a credit bureau can help. Go to the official website of any of the credit bureaus. Provide the basic information to complete the login process. The website allows you to download your credit report. Now that you have your report open in front of you, look for any negative remarks such as hard enquiry or loan settlement. Check to see if you have paid all of your previous and current debt EMIs on time. Additionally, look for any discrepancies in the report. If you find any, contact your previous lender to assist you in resolving the issue.

Q.4. How immediately does my business require funds? 

Different lenders have different time frames for disbursing business loan funds. As a result, if you are in urgent need of funds, you should personally check the time frame with the lender. Also, ensure that the documents you provided are accurate and complete. If a key document is missing, the loan processing time will take longer than usual. Some of the crucial business loan documents include a business registration certificate, balance sheet, GST certificate, and a few more.

Questions to ask from financial institutions

Q.1. Do you provide funds in my sector?

Unsecured business funding is not available to every business industry. You must personally confirm with the lender’s executive whether your industry meets their qualification criteria. Furthermore, if you work in a business that only operates during a specific month or season, you will have difficulty obtaining funds. Furthermore, any entrepreneur who conducts trade or business with an enemy nation is ineligible for a business loan.

Q.2. Do I need to provide collateral?

Business loans are essentially unsecured loans. However, in some cases, your lender may require you to put up a business asset as collateral. This occurs when you are having difficulty keeping up with sales figures or have previously delayed a few EMIs. Lenders request security to ensure they do not lose money if the borrower defaults. 

You may also provide a loan guarantor or sign a loan application with a co-borrower. Doing so will speed up the loan processing.

Q.3. What are your minimum eligibility requirements?

Each financial institution has its own set of eligibility requirements for business loans. For example, if your company is less than five years old, you will most likely have difficulty obtaining funding. The list of documents required for loan processing varies as well. The best way to learn about the eligibility criteria is to visit each lender’s website individually or go to the business loan aggregator’s website to see the minimum qualifications on a single page.

To conclude

The above questions will help you understand your needs in a much better way. It will further assist you in determining if you are eligible for low-interest unsecured business funding or not.

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