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Are you that part of the youngsters, willing to start fresh and something of their own? An idea of a startup seems incredible, but let’s ensure that you start well, we mean financially. Before we highlight the steps that can help you ease the process of obtaining a startup business loan in 2024, let’s prepare the base much needed for the proceedings.
It is necessary to Outline your business goals and your plan for using the loan in the future of your business. This eventually helps the lenders know if you’re serious about setting foot in the business game.
Steps to Get a Startup Business Loan
Step 1: Assess The Kind Of Business Loan You Need
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Term Loans (up to INR 2 crores - more as per requirement) |
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Letter of Credit |
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Equipment Finance or Machinery Loan |
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Loans under Govt. Schemes |
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2. Evaluate the Credit Score - Business and Personal Both!
Credit scores are the basis on which lenders decide whether to take a risk with the applicant. Hence, applicants with a higher credit score are more likely to pay back on time. Business credit scores are typically available after six months to one year of operation, so new businesses may lack one if the startup is brand new.
However, because loans are frequently personally guaranteed— the borrower legally agrees to repay the debt with personal funds if the business fails to repay—lenders also consider the applicant's or business owner's credit score.
3. Keep The Documents Ready
The documents help determine and verify the applicant’s identification and the existence of the business. The exact documents needed to obtain a business loan vary depending on the lender.
This can act as evidence that the business is financially stable. Lenders may also request copies of relevant business licenses and registrations, as well as banking information for direct deposit.
The kind of documents lenders can ask for are:
- Identity proof
- Address proof
- PAN card
- Income proof - to ensure the applicant has a stable income
- Proof of ownership
- Bank statement for the last six months
- Income tax returns of the applicant
- Passport size photo
- Financial projections
- Copies of registration and business licenses
4. Research Based On Your Requirement
Some lenders have the best approval rates for startup business loans, but you should compare loans from all types of lenders, including traditional ones.
Don't just look at the interest rates, terms, and loan amounts that each lender has to offer. Examine the lender's application process, funding times, and fees for doing business with them. Prequalify if you can confirm whether the lender is an option and how much the startup business loan may cost.
5. Time To Submit Applications
Once you've decided on a lender, make yourself familiar with the application process and ensure you've gathered all necessary documentation. The application and underwriting processes vary by lender, so find out if you can apply online or by phone—or if you'll need to visit a branch.
After you submit your application, a lender representative may contact you to request additional documentation, such as collateral proof or additional financial records.
Every business needs to procure funds to get started, and that can be tough. Business loans can help us save money and time.
It’s also necessary not to mix your personal and business funds. An easy approval of a startup business loan can help any individual run their business smoothly and simplify other things like tax for later.
However, many businesses fail to do so and later face issues. With the correct knowledge of the steps to taking loans for start-up businesses, we hope you kickstart your entrepreneurial journey in 2024!
Discover and apply for the Bank Loans Manager position in Bengaluru, designed for professionals with 2 to 4 years of experience.
Looking to grow your business? Explore our business loan options tailored for entrepreneurs seeking financial support to expand operations, manage cash flow, or invest in new opportunities. Learn more about how we can help your business thrive.
