Applying for business loans has become a much easier task with online application forms and quick disbursement with the help of digital lenders. Many fintechs and other Non-Banking Financial Companies (NBFCs) have added flexibility to the eligibility criteria and even reduced the documentation requirement. However, some common mistakes can get your loan application rejected or subjected to further scrutiny.
Here are a few common mistakes to avoid while applying for a business loan and make it a seamless process both for you and the lender.
One of the most common mistakes that borrowers have been continuously making while applying for a commercial loan is manipulating numbers. This is what you should completely avoid.
Every business goes through tough times and there may be valid reasons for low profits or loss. But misrepresenting them can shake the lender’s trust in the borrower followed by loan rejection. You should always stick with the right figures. Besides, you can give a valid reason for the lender to discover your plans to improve things and profits with a concrete business plan.
The lender ofcourse is lending you a loan to make profits. Your business loan application should describe this vision. And the best and the most trusted document for this is a business plan.
It best describes how you intend to grow your business within a time frame along with revenue and profit projection. Your business-winning game can be your loan-winning strategy too. And it may be better for your document to have backing support of market analysis. Your core business plan reflects your sincerity and the efforts you intend to put into your business to help it grow. And this is a big touchpoint where the lender can approve your commercial loan.
Although documentation requirements have been trimmed over time, submitting your application with insufficient information can subject it to further scrutiny. Besides, it can increase the loan process time.
It is best to have the essential supporting documents ready while applying for a business loan. Most often asked for documents are Know Your Customer (KYC), address proof, proof of income, the cash flow statement etc. NBFCs even offer unsecured loans without collateral. If you are looking for an unsecured business loan, you can submit your online application easily on Oxyzo financial services website. The company offers unsecured credit up to Rs. 5 crores.
Having an incomplete loan file can give the impression of you either trying to misrepresent or hide some information. Or it may reflect your lack of sincerity in being fully compliant with the loan requirements.
It is easy to fall into the temptation to ask for more than required when you are eligible. However, it may be best to avoid this temptation from taking in you. You may ask for more than you need and may even receive it when you are eligible. But lack of management of extra funds can land you in a financial mess. Repaying a bigger amount when you are under financial constraints can become difficult for you. This can even tamper your goodwill.
Besides, this can bring down your credit score thereby increasing the risk to your profile. The same or different lenders in future will display reluctance in lending.
Although having multiple loans may seem an easy way to get more funds, it may strain your cash flows. Not being able to pay even a single instalment on time can generate a red flag and hurt your credit score. A lender may presume that your business is now offbeat and you are unable to manage with the existing loans. The lender may doubt your financial habits resulting in the rejection of your loan application.
Lenders often stay aloof from such prospective borrowers.
There are multiple lenders and one needs to evaluate the right kind of loan for startup or an existing business. Besides the kind of loan, it is also important to research well for the right lender.
If you are looking to have a business loan, try comparing the interest rates, customer service, processing charges, pre-payment charges, flexible interest system, flexible or fixed tenure, maximum loan amount, processing time, ease of applying and the speed of approvals.
With Oxyzo lending services, you can apply for a quick business loan from anywhere in India. You can choose from plenty of commercial loan options offered by them and can also get a customised financial offer as per your specific requirements. And you’ll have a hassle-free experience with a quick disbursement of funds.