As we have mentioned in some of our articles previously, startups and small business companies are currently shaping the backbone of Indian economy. Day by day a huge population of Indians are taking to entrepreneurship rather than choosing a 9-5 desk job or a government job. This is due to the fact that our population consists of 65% of youth who are imbibed with a more risk-taking attitude, believing in self-employment, willingness to work hard and refusing to settle for stability. This is one of the main reasons why India has the second largest startup ecosystem in the world. However to translate these ideas from paper to reality, you need access to credit for business. Credit can be gained in the form of business loan for startups.
To avail a business loan for startups though isn’t all that simple and guaranteed as lenders are at discretion to grant or reject your loan application. In this blog we list out some tips while applying for business loan for startups that are sure to impress lenders when executed by the applicant!
Who can apply for credit for business?
Before we start off on tips to apply for a business loan for startups, let's look at who is eligible to apply for that loan. Ideally, individuals or a group of people who collaborate to start a business can avail a business loan for startup. When we say startup it does not necessarily mean the IT industry. Small businesses like bakery businesses, home catering services, tailoring, beauty salon services etc are also considered startups. A few basic prerequisites to apply for the loan are:
- Indian citizens can apply for the loan
- Individuals of minimum 21 of years age can get credit for business
Keep your documentation ready
Preparedness before applying for a business loan for startups leaves a good impression on traditional lenders. This is why you should keep the required business loan documents ready when your loan officer asks for it. Even if you have a solid business proposal (we’ll get to that in the next section), chances are that your lender will reject your application if you do not have the required documents in handy. Some of the common business loan documents are:
- Proof of citizenship
- Valid and original PAN and Aadhar cards
- A detailed business proposal for loan
- KYC documents
- Income tax returns
- Bank statements for past 6 months
- Proof of business ownership
Write a convincing business proposal for loan
One of the necessary documents mentioned above to secure a business loan is a robust business plan or proposal. The proposal is essentially a cover letter articulating to your lender why you deserve the loan. A business proposal is a way of showing the lender how well you know your business, market insights and how you aim to position your business financially. You will need to support your statements with numbers like cash flow reports, revenue projections, balance sheet, both business and personal credit history etc.
Asses your credit history
It is important to review your personal and business credit history before applying for a business loan for startups. Your credit profile literally conveys your creditworthiness to the lenders, thereby being a crucial factor to either accepting or rejecting your application. A good CIBIL score for business loan is needed to get approved. If you have frequent late payments, defaults and irregular cash flows the lender may term you risky and reject the loan. Review your credit history and check for any such risk factors or discrepancies before applying for the loan. Reach out to credit bureaus to correct any mistakes in the profile.
Explore other options of financing
Don’t stick to just traditional lenders. With the fast growing online economy you can reach out to online loan lenders for credit for business. There are several banks and NBFCs offering small business loans, MUDRA loans and startup loans at variable interest rates.
To ward off the worry of having a perfect CIBIL score for business loan or the tension of drafting a spot-on business proposal you can consider the option of a gold loan. Gold loans are extremely popular owing to its ease of access and instant cash disbursal, especially with the boom of online gold loan companies. Gold loans are secured types of loans where gold jewellery is pledged as collateral against the loan amount given. They are a unique yet feasible method of financing a small business startup as it does not require an extensive business proposal or scrutinize the credit profile of the applicant much.
Rupeek is one such online gold loan company that is truly tension free in all its essence. You can be assured of meeting your business expense requirements with loan amount secured at Rupeek as they offer a high per gram rate for your gold jewellery apart from an excellent feature - the gold loan calculator. The gold loan calculator enables users to find the estimated EMI for the loan amount required before applying for a loan. This gives them a fair idea of how much it is going to cost to afford a gold loan. The calculator gives you a rough estimate of how much loan you will get for a particular amount of gold you have. For example if you have 50 grams of gold, you can use Rupeek’s gold loan calculator and find out how much loan amount you can avail. Some of the other features of Rupeek’s gold loans are:
- Low interest rates starting at just 0.79%
- India’s first doorstep gold loan solution for hassle-free borrowing experience
- Online application with easy user interface
- Loan amount credited to your account within 30 minutes
The gold pledged is secured safely in nearby bank lockers and returned to the borrower in the same condition upon loan closure. You can use the credit to start the business of your dreams in a truly tension-free manner!