What You Need to Know About Entrepreneur Loans

Any expanding business constantly worries about finding new sources of working capital. Getting access to loans may be difficult for a small or medium-sized enterprise. However, banks and NBFCs provide entrepreneur loans to those who need to start or expand their business operations. Entrepreneur loans are calculated based on the borrowed amount, interest and repayment period. It will benefit business owners who need access to funds to finance various aspects of their business.

What Is An Entrepreneur Loan

When you need access to finances for your business, an entrepreneur loan can help. An entrepreneur loan can be used for multiple purposes such as business growth, the acquisition of new machinery, investment in personnel and more. To help business owners, an entrepreneur loan can help to kickstart or grow the businesses of qualified applicants who meet the eligibility requirements. Since an entrepreneur loan is an unsecured loan, you do not need any collateral to be eligible to apply and the interest rate is also reasonable.

Ways To Increase Your Chances of Getting An Entrepreneur Loan

To qualify for an entrepreneur loan, businesses must meet certain requirements. A loan application can be denied by the bank if the borrower does not meet the bank’s requirements. The following recommendations will help you get your entrepreneur loan application approved:

1. Raise Your Credit worthiness

The first thing to do if a company or its owner has a low credit score is to pinpoint the causes. Not paying credit card bills on time or late EMIs payments can negatively impact your credit score. This is why it is crucial to make all repayments on time and ensure that your bank account linked to your EMIs always has sufficient balance.

2. Do Not Apply For Loans Multiple Times

Banks reject loan applications because of poor credit reports. Businesses should know that bank loan denials affect their chances for future loan approvals. Banks are more hesitant to lend to those who have been rejected for loans in the past.

3. Find a Reliable Lender

It is crucial to research all lenders that provide the best entrepreneur loans. Selecting a bank with low-interest rates and favourable loan terms is important. Applicants are advised to use an eligibility calculator to assess their EMIs and make a better decision on whether they can make their repayments.

4. Business Longevity

Banks and lenders grant entrepreneur loans to businesses that have been in operation for at least three years. It may be more difficult to get an unsecured entrepreneur loan for a new or struggling business. As a result, businesses may be forced to search for entrepreneur loans that are secured with collateral.

5. Assess Repayment Capacity

A business owner should apply for an entrepreneur loan only after they have determined their ability to repay the loan amount plus the interest. If the entrepreneur loan amount is too high, the lender may turn down the loan application by deeming the amount too much to be repaid.

6. Keep Accurate Documentation

Any legitimate business must register for GST and have their audited financial records. Lending institutions and banks consult these documents while determining whether entrepreneur loan applicants qualify for loans.

What to Do If Your Loan Application Is Rejected

In the event of an entrepreneur loan application rejection, these are the steps to be taken:

1. Find Out The Reasons For Rejection

Usually, the reasons include a low credit score and a high debt-to-income ratio. Finding out the reasons will help you in the future if or when you decide to reapply.

2. Verify Your Credit Record

Negative credit history can be a major reason behind the rejection of an entrepreneur loan. Before submitting another application, double-check and resolve any inconsistencies you find.

3. Reapply for the Loan

Before reapplying, check the reasons behind your loan rejection. Work on your credit score and resolve the issues for your loan rejection. Follow the lender’s further instructions to get your entrepreneur loan approved.

Eligibility Requirements

These are the eligibility requirements for a business loan for entrepreneurs:

• Between 21 and 65 years of age
• The business must be a minimum of 3 years
• Must be an Indian citizen or resident
• Must be self-employed under any of the categories: business owner, sole proprietor, partner of a partnership firm, promoter/director, doctor, CA and architect
• Must have a CIBIL score of 700 or higher

In addition, some banks also require a minimum annual revenue or ownership of at least one property.

Documents Required

These are the documents required for an entrepreneur loan:

• ID proof documents such as Aadhaar card, voter’s ID and more
• Address proof documents such as utility bills, voter’s ID, Aadhaar card and more
• PAN card
• Proof of business ownership
• Company’s financial documents for the required period
• Bank statements and other financial statements for the required period

Application Process

You can either apply for an entrepreneur loan online or at the nearest branch of the bank or lender. The application process is simple and requires you to:

• Obtain the application form from the bank branch or website
• Fill out the form with accurate information that matches your supporting documentation
• Attach or upload all required documents mentioned above
• Submit your application plus documents to the bank personnel or online

Each lender will have their own approval process which includes the time required to approve the loan and transfer the funds to your bank account.

Conclusion

If you are considering applying for an entrepreneur loan, it is important to go through all the factors mentioned in this article including assessing your eligibility, preparing your documentation and figuring out your ability to repay the loan. Before applying, it is important to determine the exact loan amount that you require and not more or less since the amount will impact your repayments. Once you research the different lenders that offer a business loan for entrepreneurs, check the interest rate and tenure of the loan to determine whether the EMIs are within your repayment ability. For more information and guidance on entrepreneur loans, visit Piramal Finance and read informative articles like this one.