Get your SME Loan Request Approved Following These Essential Tips
As per a recent research and analysis report, out of the total loans sanctioned online through the NBFC-P2P sector, 64% were disbursed to the medium and small size businesses. The data stands for the year 2018 only and includes both new and old enterprises belonging to this business type. Besides, disbursement of MSME and SME loan also saw a jump of 14.8% in the financial year 2017-18.
Nevertheless, in the process of securing this loan, SMEs may come across hurdles for their loan application approval. Lenders evaluate numerous factors, including the feasibility of lending out to SMEs before approving the loan application. You may thus utilise a few tips to give a measurable projection for your SME loan requirement, its usage and repayment when applying for the same.
Tips to get your SME loan request approved:
a) Create a feasible investment plan for your business
You need to have a proper plan for your business to invest in. A business with a sound plan is a work half done when it comes to availing additional finance to fund the same.
Therefore, make an in-depth assessment of the operations to be carried out with the funds secured. The essential details you may plan for include experience of the management team, market analysis, projection of finances and the company’s overview.
b) Have a proper management of your cash flow
When evaluating the loan application, a lender assesses how likely the borrower is to repay the credit timely. Proper cash flow management forms an essential part of how an SME (SME full form – Small and Medium Enterprises) will generate and regulate the flow of cash. It thus establishes the business’s liquidity position.
Take necessary measures to improve the same like enforcement of payment discipline, cutting down on unnecessary expenses, reduction in overheads, etc.
c) Take steps to boost credit score
A high credit score helps build lender confidence. For this, you must make sure that the credit score of both you as an individual and your business remains high. A credit score of 750 is considered ideal to avail the loan.
Thus, you may take the necessary steps to improve your credit score. It may include the following:
- Keep your credit utilisation ratio between 25% and 30% of the total debt availed.
- Pay all your bills and dues in time.
- Manage your credit accounts wisely.
d) Create a checklist of documents required
Keeping your documents handy before you apply for the loan helps quicken its approval. It also conveys to the lender your well-preparedness to avail it. Thus, make sure to create a checklist of the same and arrange your documents accordingly.
Prepare with the following documents before sending your loan application.
- Proof of identity and address
- Documents supporting the business continuation
- Income proofs including bank account statement, business’s balance sheet, profit & loss statement, latest ITR filed, etc.
e) Make a strategy for loan repayment
Every SME needs a solid financial plan to be successful in business. So, before requesting for an SME finance check the SME loan interest rate with a well-planned strategy for credit repayment. For this, you may identify the sources plan to utilise for loan repayment and convey the same to your lender.
With a sound plan and transparency during loan application, the chances of loan approval increase. Hence, follow the tips and approach your lender to avail the loan. Once you get the approval and receive your loan, you may utilise the benefits of MSME loan.