Did you just start your entrepreneurial career? Or have you been in operation for more than ten years? It does not matter where you stand today. Whether you are an experienced business owner or just getting started, you might need financial help for your business. Well, there is nothing wrong with asking for external help in this regard. A lot of businesses do require more than their estimated capital in their growing years.
A lot of businessmen are unaware of the beneficial schemes available in the market. They are also hesitant about taking out a bank business loan. The hesitation could be because they are unclear about payback terms, interest rates, foreclosure, assets to mortgage, and many more aspects. To help businesses make sensible choices, we have brought you this article to get you started. Let us demonstrate the entire process of applying for a bank loan in detail.
How To Apply To A Bank Business Loan?
Ask yourself if you need a loan before you start your business loan application. This might be a resounding yes if you are a startup. However, if you’ve been in business for a while, you might be confused between the two answers. Find out why you need money in the first place. This will help you understand what is SME loan and why you need it. Additionally, consider other possible sources of funding for your needs.
If you decide that applying for a small bank business loan is the best course of action, follow these effortless steps to find out how to do it.
1. Calculate Your Requirements: Make a list of your financial needs to help you evaluate how much of a loan you need. An SME loan is what you might need:
- Launch a business or extend a branch
- Purchase more equipment.
- Boost inventory and cash flow.
Depending on the operating stage of your firm is in, you may need the money for a variety of things. Make a list of the purposes for which you intend to use the funds in order to determine the best amount for which you will apply for a bank business loan.
2. Examine The History And Score Of Your Credit: Your credit history and score are reviewed by lenders as part of the loan application process. Additionally, lenders frequently review both personal and company credit data. Before asking for any loan, it’s a good idea to check your credit score, especially if you’re a more recent business owner. If your credit score is good, apply for a bank business loan.
3. Examine your lending possibilities: There are many different lending choices available nowadays. You need to be aware of the many kinds of loans before you start looking for a lender and submitting an application. Many loans are created for particular types of enterprises or financial circumstances. Consider the following bank business loan categories:
- Bank Business Loans: This is the most common type of loan. Find out the SME loan interest rate before applying.
- Small Business Administration: They are partially guaranteed by SBA.
SBA 7(a) loan: Use for working capital, furnishings, home improvements, and refinancing
SBA microloan: Favorable for launching a business
- Short-term Loan: Repay over a shorter period of time (with interest)
- Long-term Loan: Larger sums paid with low interest rates over an extended period of time
- Long-term and short-term loans: You repay with interest over a certain period of time are referred to as term loans.
- Disaster loans: Loans for companies who are having trouble because of declared catastrophes (e.g., natural disasters, COVID-19)
- Microloans: Financial assistance for small-scale businesses
As you can see, there are numerous possibilities for funding businesses. Do your research and think about the pros and cons of each loan option before you decide.
4. Examine the SCORE and SBDC offices in your area: If your company is relatively new, you might want to visit the SCORE and SBDC offices in your area. Nationwide, the Small Business Development Center (SBDC) and SCORE offer small firms’ discreet guidance. A retired group of company professionals called SCORE is available to advise entrepreneurs one-on-one. The Small Business Administration’s SBDC is a resource for small enterprises. Both organizations can help you with the application process for a bank business loan and may also answer any questions you may have.
5. Select the lending product that is right for you: You have many options for obtaining a small bank business loan. Thoroughly do research on the types of loans available. There are private lenders, but banks are a lot more trustworthy. What are SME loan interest rates? This also should be researched. Usually, SME interest rates are low.
But you can still check the plans and rates of the following lenders:
- Banks
- Unions of credit
- charitable lending
- lending websites
- Microlenders
6. Compile the relevant paperwork: Find out what paperwork the lender needs for a loan after you’ve decided which lender you want to work with.
Typically, you might have to give the following details in a bank business loan:
- Business strategy
- Financial records
- Bank account for businesses
- Banking records
- Business permits and licenses
- Identity documents, such as a driver’s license
- Other corporate documents (e.g., articles of incorporation)
- Refund of business taxes
You might not yet have all of the aforementioned information if your company is new. Before you apply for a loan, find out what information you need to give and what accounts you need to open.
7. Finish the application: After you’ve done all the hard work of doing research and putting together papers, send in your application, which is your official loan application. Set up a meeting with a lender to begin applying for a bank business loan. You can even apply online.
After submission of the application, it is all in the hands of the lender. Your application will undergo underwriting once you have finished. Before the loan is approved, your information, such as your income, debts, and credit history is checked. This is called “underwriting.” The time it takes to complete the application, underwrite it, and secure money might range from a few days to a few months.
How To Choose The Bank Business Loan?
Bank loans are easy to apply for and a safe place to submit your documents. Since there has been a lot of fraud in private money lending, a lot of people still prefer old-school methods. Business loans at banks are given at a reasonable interest rate, and the repayment period is also as per the plans provided.
Submitting applications for loans is even easier with digitalization. HDFC Bank provides a SmartHub Vyapar app for merchants and business owners. They can easily get the app and use it to fill out an application for a bank business loan. Documents can also be submitted on the app. One can even track the progress of a loan application through this app. Loan seekers can try this modern way of applying for loans.