Getting a small business loan application approved can be overwhelming at times, especially now when lenders are being cautious about who they are lending to. But that does not mean getting an MSME loan is out of the question. What you need to remember is that the lenders are trying to evaluate whether you have the capability to pay them back. And so, you need to prove that you can and will pay back the debt.
While you cannot do anything about lending criteria, you can follow these time-tested steps to improve your chances of securing that MSME business loan.
Here is how to increase your chances of getting that MSME loan
1. Regularly keep track of your credit score
Ensuring that the credit score is healthy has to be a priority.It signifies a company’s financial state and the ability to repay loans. Constantly monitoring credit transactions and fixing inaccuracies can go a long way in reducing your interest payments as several major financial institutions offer a discounted MSME loan interest rate for companies with a healthy credit score. Further, the score can come in handy for getting an MSME loan subsidy later on.
2. Boosting cash flow Maintaining a healthy cash flow lets the lender know that you are capable of repaying the loan. Ensuring your clients are paying you on time will in turn allow you the luxury of a larger
MSME loan limit. The
cash flow can be increased by providing cash discounts to clients.
3. Paying taxes on time Settling your income tax, sales tax, GST, etc. on time will improve your chances of getting a loan with a competitive MSME interest rate. Paying taxes promptly not just
improves credit score but also makes the lenders have more faith in your enterprise.
Also Read: Check Your Business Loan Eligibility 4. Prioritize repaying lenders Given that lenders play a vital role in your credit score as they report to credit rating agencies regarding your borrowing and repaying habits, it makes sense to pay them on time. Make this a priority, as your SME finance options are entirely dependent on maintaining a good relationship with your lenders. Next time you apply for credit, you will find that your credit score will come in handy.
5. Proper documentation To avoid unnecessary delays or the rejection of your loan application, ensure that you are ready with all the documents that the lender is looking for. It will be listed on their website. Also, worth noting is the importance of filling the application forms perfectly.
Also Read: Small Business Loan - How to Get One 6. Keeping credit utilization low Lenders generally consider forty percent of your monthly income to see if you are capable of repaying the interest consistently. To increase your chances of getting an MSME loan, ensure that your exposure to debt is low. Aside from this, lenders are also known to check the balance sheet and the value of the assets you own. Ensure that the business meets the criteria for the loans before applying.
7. Approaching lenders with which you maintain your deposits It is always better to approach the
financial institutions with whom you already have an active account. This is because of the trust that the lender might have due to the years of them doing business with your company. As a valued customer, you might be able to negotiate better loan terms as well.
Also Read: How to Qualify for SME Loans in Easy Steps The Bottom Line Financial institutions have tightened their lending norms due to economic uncertainty in the country. Before applying for a loan, it is best to understand your current situation. You should assess your company’s
creditworthiness and process to fix the issues, if there are any. Boosting your
business loan-eligibility and credit health to get faster and easier MSME loans can help you unleash your potential like nothing else.
