Businesses rely on a stable and secure financial support to resume their operations and expansion. However, very few organisations enjoy a steady stream of revenue throughout a fiscal year and often face monetary crisis sustaining their working capital and spend funds for growth at the same time.
Organisations often opt for an instant business loan during such times to overcome a financial hurdle. These are unsecured credit offered by several financial institutions in India. A business loan relieves the financial shortcoming and provides the much-needed economic boost to pay for the company’s requirements.
Although, a borrower has to meet strict business loan eligibility criteria because the advance does not necessitate pledging any collateral against the money. A lender scrutinizes several financial, corporate, and professional aspects of the applicant to decide their creditworthiness. The applicant can get instant approval for business funding only if they meet all these requirements.
The following criteria are necessary to get instant approval on a business loan.
The credit score is 3-digit representation of an individual’s financial habits. The range of credit score falls between 300 to 900. Financial institutions prefer applicants who have a higher credit score as it shows that they are financially responsible and have a higher chance of repaying the debt.
You should always focus on to work like that your credit score could be close to 900. It brings several benefits to a person looking for lending and credit card.
Lenders generally look for a credit score of 750 or higher before approving a business finance. It shows that they have made timely repayments on all their previous debts and have no history of defaulting. A business owner can also follow some simple steps to maintain a good business credit score.
A credit score close to 900 means you will get the loan request approval fast as well as loan interest rate amount will be lower than others.
An applicant’s credit history carries the details of his/her previous debts, number, types and duration of credit account held, total debt, repayment history, recent credit inquiries, and other vital details.
It should be remembered that your generated credit score will depend upon your credit score. Your credit score get updated by CIBIL department after every 30 to 45 days. This credit score generated on the basis of your account transactions and payments.
A borrower applying for a business loan should have a good credit history. He or she should not have failed to repay any previous debts, have non-frequent credit inquiries or any such adverse incident that might hurt their credit rating.
Age of your business
How the old your business will be, the more chances for loan approval will be there. Most of the lenders are there who provides business funding only when your business has successfully completed 3 years.
Cash flow and income
Your debt-to-income ratio is also the main point of consideration. Higher your cash flow and income will bring the higher opportunity for the lending. You cash flow positions determines how your cash positions get managing. As it’s obvious a great cash flow and income will definitely help one to pay their debts.
Obligations are the existing debt that an individual has to repay. An individual should not have too high financial obligations as they might find it difficult to repay another loan over the existing ones.
Financial institutions use FOIR, or Fixed Obligations to Income Ratio, to measure an individual’s obligations and eligibility for an instant business loan. Ideally, one’s FOIR should stay between 30% and 50% as it indicates a stable and responsible financial habits.
Lenders prefer applicants who have a decent credit score and FOIR ratio. An applicant can also negotiate their business lending rates with a strong CIBIL score and FOIR. Several financial institutions offer credits to eligible candidates at an affordable interest rate, flexible tenor and with several such features and benefits.
Lenders also consider several professional aspects of a business owner before approving credit.
Business credibility indicates the stability, market value, and desirability of an organisation. A company with high business credibility is likely to be preferred for an instant business loan than a new firm.
Annual turnover plays a crucial role to determine the creditworthiness of an organisation. An establishment that enjoys a higher turnover is likely to have the capacity to repay a larger loan. It makes them more credible for an instant business loan.
Future growth strategy
An organisation with a sound growth plan is more likely to be preferred for a business loan. It also shows that an organisation has the necessary financial habits to better manage business growth.
Fulfilling all these requirements will ensure that a company is eligible for instant approval for business funding. It will also improve its market presence and help secure higher revenues in the long run.