The smooth functioning of daily business operations heavily relies on working capital, and a shortage of capital can negatively impact these operations.
A business loan is an excellent financing option that can help bridge financial gaps and enable business entities to function seamlessly.
However, MSMEs and startup sectors often face obstacles in obtaining business loans. Nevertheless, with a methodical approach and thorough planning, these businesses can easily get their loan application approved and access the necessary funds.
7 tips to expedite business loan disbursal process
Obtaining a business loan can be a time-consuming process, and the delay in loan disbursal can negatively impact business operations. Here are some tips to expedite the business loan disbursal process:
Tip 1: Know your credit score
A borrower’s creditworthiness is reflected in their CIBIL score. If a business has a poor CIBIL score, its loan application may be rejected. Moreover, businesses with low CIBIL scores may be charged higher interest rates on their loans.
Therefore, having a good CIBIL score can speed up the business loan application process and give the borrower an advantage in negotiating a competitive interest rate. In case there are discrepancies in the credit score, businesses should first settle them with the credit bureau before applying for a loan.
Tip 2: Meet required eligibility criteria
Lenders set specific eligibility criteria to assess the borrower’s repayment capability for different business loans.
It is, therefore, crucial to meet these eligibility criteria if you want to obtain quick approval for a business loan. Failure to fulfil these criteria will result in immediate rejection of your loan application by the lender.
Tip 3: Prepare a robust business plan
It is essential to have a well-drafted business plan before applying for a business loan. Presenting your business plan to lenders and highlighting the areas where the funds will be utilised can increase your chances of obtaining quick loan approval.
Tip 4: Keep documents in order
Having well-organised documents is another crucial aspect that can speed up the process of loan approval. Maintaining proper documentation can help you avoid unnecessary delays and ensure faster approval of your loan.
The required documents generally include identity proof, address proof, profit and loss statements, balance sheets, cash flow statements, etc. It is advisable to obtain comprehensive information about the necessary documents from the lenders to expedite the business loan disbursal process.
Tip 5: Identify the required business loan amount
To increase the likelihood of loan application approval, it is advisable to determine the exact financial requirements of your business. This can help you plan your finances effectively and apply for the loan amount that you actually need.
In summary, a well-planned business plan and budget not only assist businesses in evaluating their financial condition but also enable them to address lenders’ queries, improving the chances of obtaining quick loan approval.
Tip 6: Choose the appropriate lender
The speed of receiving the loan amount also depends on the lender you choose. It is essential to research and compare loan terms, eligibility criteria, and other offerings of various lenders before applying for a loan. After thorough analysis, select a lender that offers terms and conditions that suit your requirements.
For instance, Razorpay is a well-known payment solution provider that assists in a faster loan disbursal process, with minimal documentation with it’s Line of Credit facility.
Tip 7: Have regular cash flow
As per research, almost 82 % of businesses fail because of cash flow problems. Lenders scrutinise your company’s free cash flow to ensure that you have the ability to repay the loan. Inadequate liquidity can negatively affect a lender’s confidence, potentially leading to loan rejection.
To prevent this, you should improve your cash flow by cutting out unnecessary expenses. Additionally, if your lender discovers that your business expenses are higher than your income or if there are seasonal fluctuations, they may reject your loan application.
How can Razorpay help businesses access business loans quickly
Razorpay Line of Credit allows businesses to receive a lump sum amount of funding to meet various financial needs without having to pledge valuable assets as collateral. This feature provides a 24/7 withdrawal facility, which can help businesses sustain themselves in a highly competitive environment. Additionally, the loan does not have any processing fees, and the interest rates charged on the borrowed amount are competitive.
Here are some benefits of Razorpay Line of Credit:
- Soft credit checks with your consent
- Quick and easy access to funds
- Flexible repayment options
- No collateral required
- Low-interest rates
Frequently Asked Questions
How can MSME and startup sectors use the sanctioned business loan amount?
Business loans can be used to fund varied financial business requirements like stocking up inventory, clearing dues, hiring professionals, gathering funds for financial exigencies, running marketing campaigns, etc.
How to improve CIBIL score?
You can improve your CIBIL score by paying your dues on time, maintaining a healthy credit mix, reviewing your credit score frequently, etc.