Money is a crucial factor for setting up and running any business. If you’ve opened shop, chances are you’ve already pooled in a large part of your savings towards capital investment. However, it takes more than just fixed assets like a shop/office, furniture, tools, machinery etc. to get the everyday trade rolling.
For any growing business, it is important to have a constant flow of working capital. Steady funds when a business is growing, enhances its daily operations. Expenses such as inventory purchases, marketing campaigns and payroll can be effectively managed with flowing capital. Lack of finance to pay for necessary expenses could severely affect the working of any business.
To avoid unnecessary hassle of cash flow, you could opt for a short-term loan for your business.
What is a short-term business loan?
A short term business loan is taken by small businesses to cover their daily operational expenses. Short-term loans are an excellent way for a business to focus on their growth and generate capital. These days short-term finance has become a popular option among small business owners to tackle their financial needs. They are used to cover short-term costs such as wages, accounts payable and similar expenses.
Many banks and Non-Banking Financial Companies (NBFCs) like Bajaj Finserv offer unsecured short-term business loans. You can avail these business loans whenever you’re in need of money without pledging any collateral.
If you are in the process of grooming your business and could use some handy cash, apply for a short-term business loan. Here are a few tips that can improve your chances of getting one.
- Have a good CIBIL score
A good CIBIL score bears proof to not only your personal financial health but also your history with credit. This could be particularly useful for lenders offering you a short-term business loan without any collateral. Having a CIBIL score of 750 and above will help you get a loan and will also improve your chances of getting a better interest rate.
- Create a strong business plan
A lender assesses your ability to repay based on your business pitch. A strong plan exhibits a financial projection for the next three to five years. Through this plan, you have the potential to instil confidence in the lender of your ability to repay the loan within the specified time.
- Reveal how you intend to use the loan
In addition to your business plan, you may also want to convey to the lender the exact purpose of the loan. Some lenders determine credibility based on the reasons for the loan. Ideally, the most common requirements for a loan include management of raw material, inventory purchase, administrative expenses etc. The lender may consider these reasons, in order to approve your short term business loan.
- Maintain relevant documents
Lenders require a bunch of documents when you apply for a loan. These include Income Tax Returns (personal and business), balance sheets, income statements, business licenses, identity proofs and address proofs etc. The earlier you ready these documents, the quicker your loan process can get started.
- Access risk factors
Whether it is a bank or NBFC, a lending institution will evaluate your loan application based on the risk involved. If they consider you a ‘risky’ borrower’ your loan may not be approved. To ensure you avoid this situation, look into risk factors such as a history of default payments, poor revenue income, weak accounting system, a short period in the industry and poor management. Improve these factors to increase your chances of securing a loan.
NBFCs like Bajaj Finserv are helping entrepreneurs harness the full potential of their business ideas with pre-approved business loans. This makes it easy to apply and avail the loan. All you need to do is share your details and check out your pre-approved offers here.
Nishant is a passionate blogger. He has expertise in writing finance articles.He have been serving society as a financial adviser. He loves keeping himself up-to-date with the news and happenings around. He is always open to learning and shares his experiences on Greetings of the Day.