What to do and not to do while applying for an MSME loan online?
Credit facilities specially offered to MSME firms are known as MSME loans. MSME loans are to satisfy the requirement of Start-ups, entrepreneurs, businesses and self-employed individuals for operational costs or expansion of their businesses.
Entrepreneurs must plan a budget for expansion, which involves financial planning. A company loan is a crucial component of the business expansion strategy. Business owners must understand when to apply for a business loan, considering the dos and don’ts while doing so. This involves carefully choosing the lender, determining the appropriate loan amount, getting ready with a clear credit history, and other factors. The dos and don’ts when applying for an MSME Loan are listed below.
A project’s or expansion plan’s success depends on the quantity of a business loan. Entrepreneurs occasionally underestimate their needs, which can hurt their financial situation by costing them more on interest and preventing them from getting the results they expected. Therefore, before applying for a business loan, one must be sure that they have done their research.
Entrepreneurs often forget the importance of presenting a strong business plan to the lender. In order to persuade them that the money provided would allow their endeavour to develop and readily repay the borrowed amount. Lenders want to ensure that the borrower has a suitable and fool proof business plan in mind. Lack of a solid plan for repayment makes you an undesirable borrower.
The business owner’s credit rating or credit history is an important factor of MSME loans. A person with a poor credit score should work to improve it in order to obtain fund approval at the best terms.
Businesses can use MSME loans for a number of things, including marketing, working capital management, and inventory control. Due to the large financial outlay required for investments in plant and machinery, an MSME loan of up to INR 1 Crore may help allow your business to grow without placing a burden on your company’s capital resources. You might find new customers in developing markets with the aid of an effective marketing strategy. Hence, a proper understanding of the business requirement can help the business to apply for the right loan.
Loan processes, loan terms and interest rates vary from lender to lender. Some lenders may approve a person with a bad credit score for a business loan, while others might not. Therefore, before applying, applicants should examine these variables since if they choose the wrong lender, they risk paying greater interest costs or having their loan application denied.
While proper research must be done before choosing a lender, it is not advisable to apply to several lenders at once because this shows that the applicant is in desperate need of a loan.
Such behaviour affects a person’s capacity to borrow money at a low-interest rate and is reflected in their credit history and score.
Providing documents for the loan application is one of the most important tasks. It is advisable to have all the requested documents prepared beforehand. Identification documents such as an Aadhaar card, driver’s licence, PAN card, passport, or voter ID, documents that serve as proof of address including a lease agreement, a ration card, and recent utility bills, documents that attest the existence of the business, such as the memorandum of agreement, certificate of incorporation, trade licence, partnership agreement, registration certificate, sales agreement, and GST registration certificate are few of the important documents required for applying for an MSME loan
Chola has solutions for all your business funding needs. Chola provides Small and Medium Enterprises Loans of various types such as Secured Term loans, Supply Chain Finance, Equipment Finance, Loan Against Shares, and ESOP Financing ranging from INR 10 Lakh to INR 20 Crore.