Qualifying for a shop loan is easier when you are prepared. Whether you apply for a shop loan with an NBFC or a bank, you need to be familiar with the lender’s requirements. Knowing the lender’s criteria before applying for a loan for a shop would save time as well as frustration. Let’s take a look at the five steps to qualify for a loan for shop opening.
Build Credit Score
Credit score ranges between 300 and 900 (the higher, the better). It is evaluated on your ability to repay bills and debts, such as credit card and electricity bill. The score is based on the following five factors:
- Payment history (35%)
- The amount owed to credit card and other debt (30%)
- Tenure of the credit (15%)
- Types of credit in use (10%)
- Recent loan enquiries (10%)
Paying all bills and loans on time is essential to build a healthy credit score. However, even if you pay your bills on time, sometimes wrong entry in the credit report damage the score. But if the error is recognized and raised with credit rating agencies, it can be corrected.
Know the Lender’s Requirements
Completely meeting the lender’s minimum qualification and requirements will make your application strong. Some lenders may be flexible if you are not meeting one requirement but others well. But the best chances of getting the application approved is when you meet all the requirements. The borrower typically needs to meet the credit score, business vintage, revenue, and ITR. And lenders generally do not offer loans to applicants who have bankruptcies or criminal records. Said that, qualifying for online lenders is easier. The online lenders typically have less stringent requirements for a shop loan. Additionally, they also offer business loan eligibility calculator on their website where you can check your eligibility in just 10 seconds.
Gather Documents
Banks and online lenders ask for a long list of personal and business documents along with the loan application. The required documents include:
- PAN Card
- ITR for last two years
- Bank statement for nine months
- Business place address proof
- Residence address proof
Submitting the hard copies of the documents to the bank would consume a lot of time. But it would not be an issue if you avail the shop loan from online lenders. You will have to upload the soft copies of the documents online without visiting the lender in person.
Business Plan
All loan lenders would undoubtedly want to know how you will repay the money. For this, they require a solid business plan with the details of the purpose of the loan and how the loan will help in increasing profits. A business plan should have the following points:
- Business description
- Products and services on offer
- Management team
- Industry analysis
- SWOT analysis
- Promotional and marketing strategy
Know your Requirements
Knowing your requirements is also essential. Before deciding to avail a shop loan, you need to know the following things:
- Loan amount
- Collateral availability
- Repayment tenure and the EMI cost you can afford
- Business loan interest rate you can afford
Availing a loan for the shop can be very beneficial, and the amount can be used for various purposes. And now that you know how to qualify for a shop loan in just five steps, you can avail the services and take your small shop to new heights.