Key Factors Affecting Business Loan Application

Many young entrepreneurs are channeling their knowledge, expertise, and energy into making their innovation-laden business a quick start but often get quite a few jerks due to the lack of appropriate funding. Be it a new business or a well-furnished one, to strive and grow, an ample amount of funding is required. A business loan comes in handy when one wants to finance their business. Funds are required at every stage of the business. New businesses require it for meeting initial costs related to investments whereas later money is required as working capital. Thus, it is a necessity for businesses to have access to funds as and when required so that they can touch heights.

However, business loan providers don’t just approve the loan for anyone and everyone. They have a defined criterion based upon which they decide whether to approve or reject the loan application. Business loan rejection can be very dissatisfying and hence it is very important to know the reasons which could result in the same.

  • Credit Report on Business

Lenders are concerned about the repayment of the loans. Thus, before offering their loan products to the borrowers, they check the credibility of the business and check its past payment records. A CIBIL company credit report on businesses is synonymous with the credit score of the individuals. Lenders check your past credit history to know about the financial behavior of the company and also to see how disciplined you have been with the repayments of past loans. Thus it is always advisable to maintain your Company credit report by making timely payments of credits and avoiding any defaults to get quick business loan approvals.

  • Profits of Business

It is simple logic that no lender will want to risk his money to any non-profitable business. Profits signify the growth and repayment ability of the business. On account of the balance sheet and revenues generated by the business, lenders judge the credibility of the business. In case the lender approves the business loan of any non-profit generating company, then they charge a higher interest rate to counter their risk. This would mean a higher EMI on the business’s head. Vice versa is true too when the profits of the business are high, the interest rate charged by the lender is low and so is the calculated EMI.

  • Debt status of Business

Lenders aren’t too willing to offer their business loan products to companies with high debts as it signifies that the profit that will be generated will eventually clear off the debts and the profit margin will decrease. Lenders prefer playing safe. Thus, if the balance sheet of the business features a lot of debts, the chances of rejection of a business loan application increase considerably.

  • Availability of security

Though small business loans are available without the requirement of collateral, bigger loan amount requires security in the form of any asset. Lack of a high-value asset is where the businesses fall short and hence are unable to procure a bigger loan amount. This is the main reason why the expansion and growth of several businesses come to a halt.

  • Business Plan

Your business plan defines your future projects and henceforth your growth and net worth. Projects with prospective better yields are more likely to get your business loan approved as opposed to projects and investments where returns don’t seem too attractive.  Lenders seek a business plan to understand how and where the loan amount will be utilized for. Based on the same, they decide whether to grant the loan or not.

In a nutshell, lenders prefer those businesses that have higher profit prospects and are likely to get bigger with time. Young business loan borrowers must keep these pointers in mind if they wish to get access to funds. No business can ever thrive without appropriate funding at the right time and a business loan is the perfect way of getting that financing. Business loans in Delhi can be procured by banks, NBFCs, and through platforms like that of LoansJagat. Using the latter platform helps you to compare different lenders for their offerings so that you can choose the best one that meets your needs and requirements.


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