How hard is it to get business loans? It is an interesting question to pose. It is like asking how hard is it to swim in an ocean, is If you ask a sloth. It would say it is challenging. A blue whale, on the other fin, would go like, as easy as possible. So, the point that we’re trying to make here, depending on whom you ask, the answer of how easy it is to acquire business loans, entirely depends on whom you ask.

As you’d come across, several instances of entrepreneurs talking about the ease of doing business in India, and the ease of acquiring loans for small business, you’d get varied responses. Some would say their banks made them sign too many documents, the others would confirm they’d got the loan, via ZipLoan, with three simple steps, and all of it was a cakewalk.

However, since there is no one answer, and all of them are subjective, let us try and deconstruct the myriad of factors responsible for the ease of getting business loans.

First of all, let us understand the kinds of loans. There are majorly two kinds of loans, secured loans and unsecured business loans. Depending on your needs and your ability to repay, you can decide what type of loan you should pursue. A secured loan is the one you take with collateral, which could be a car or a house or property. Collateral can be taken away by the lender in case of a lapse in loan payment.

Unsecured business loans are the ones that do not have collateral requirements. Both have their merits and demerits. There’s also another form of lending, which is angel investing, in which an individual or group of individuals invest their money as a business loan.

So, let us figure out what are the various factors that decide how easy or hard it is to get loans for business. If it is your first loan with no prior experience of doing business, the lenders would be a little sceptical about giving you money as the recovery of the said money would be slightly riskier. If your company has been doing well and has been around for quite some time, it is easier to acquire business loans as the profit and viability of the business model speaks for itself.

Business Loan Application Process: Explained

Speaking of the business model, it is also imperative that your business needs to stand out for itself. It has a bright, proven USP, and can withstand competition, e.g. in Telecom sector or E-Commerce space unless you’re doing something absolutely new, it will be difficult for you to find loans.

It is not just intrinsic factors that make it difficult or easy to avail loans for business. But also extrinsic factors, such as the economic conditions prevailing in the country when you need the said loan. If the economy is booming, the businesses are popping up, and it is reasonably smooth and easy to avail loans for businesses of any size.

However, the opposite is true during an economic slump. Other factors such as your need, proposal, business plan, and existing relations with the lender from which you’ve already taken a loan before, also enable you to avail these loans smoothly. One more thing that is required is an excellent CIBIL score. Somewhere above 715 also does you a world of good while seeking a loan.

A high CIBIL score is an essential financial badge that exhibits you’ve been on point in your financial dealings. Independent financiers have their own rating system to gauge the business and its viability to provide loans. At ZipLoan, we have a sophisticated system called ZipScore, which goes beyond the CIBIL score.

The other vital factors in actually availing loans for business is the integrity of the documents you’ll require in getting these loans. These documents need to be complete, legitimate and be provided without fail for the ease of loan acquisition. These are the documents that you’ll need to provide to get the business loans.

  • Documents that display the financial health of the company:
  1. Balance sheet, profit and loss, audit reports, VAT returns of the past three years, e.g. if you need a loan in 2020, you may show these reports from 2016 to 2019.
  2. Current performance and the projected turnover, this needs to be provided on the official letterhead of the company.
  • General documents that need to be provided as proof of address and of existence, which need to be self-attested.
  1. KYC – Know Your Customer documents: Incorporation Certification, Partnership Deed, Establishment certificate.
  2. Pan Cards: Of business entity, owners, and that of promoters.
  3. Address Proof: of business entity, owners, and that of promoters
  4. Aadhar Card, Driving Licence, Voter’s ID card also need to be provided as address proof.
  • Bank Statements: If you’re a first-time borrower, then bank statements of 9 months and those of 12 months for others. If the SME has more than one bank account, then the statements need to represent a 75% turnover.

It is interesting to note that most businesses only seek out these loans and prepare the paperwork, and run helter-skelter in panic in their dire need of money. A prudent thing to do would be to have these documents always prepared way beforehand so the process of taking loans for business can begin at the earliest.

So, towards the end of the article, we arrive at the conclusion that depending on several factors, such as the state of the economy, type of business, the stage business is operating in, personal relations with the lender, CIBIL score, etc. are factors that are extremely crucial to decide the ease of acquiring business loans.

However, with newer financiers and Fin-Tech companies emerging, the process of getting business loans has become smoother and smoother. At ZipLoan, you can get loans for your business in simple steps with minimum documents, no collateral, and within three days. Go ahead, conquer the world, leave the loans, and finance in the trusted hands of ZipLoan!