Common reasons for rejection of business loan India

business loan India

If you are looking to improve your business reach by investing in new markets or you wish to enhance production facilities, what you need is a business loan India. Before you start the process of applying for loans with various lenders, it makes sense for you to understand what to do, what not to do. Among the ‘what not to do’s comes the understanding of what factors can get your loan application rejected. Some of these also help figure out how to keep the business loan interest low and affordable. Read on to know more.

Reason 1: Applying to multiple lenders at the same time

Beware of making too many loan applications at the same time. This gives the impression that you are desperate for cash, which tells lenders that you are not in a sound financial position.  That is not the impression you want to give to a firm that is planning to loan you funds on the expectation that you will repay it on time. Shortlist the lenders that are best for you and then apply only to those handful of lenders to reduce this risk.

Reason 2: Poor credit score

Your credit score is the measure that the lender uses to determine whether you are a risk worth taking for him. The credit score is a tool to tell him how well you have handled your financial commitments until now and how much you can be trusted to carry out your responsibilities to perfection if he loans you the money. A poor credit score raises red flags for the financial institution because it indicates that you may default on the loan.  The lender may reject your application outright or be willing to approve it only with a high business loan interest to compensate for the higher risk.

Reason 3: Poor business plan

A very common mistake that many business owners make is to pay little or no attention to their business plan. After the business has been launched and it is developing, they feel that the business plan has no big role to play. However, this plan is the blueprint showing how you intend to take the business forward, what you intend for it to achieve. How you hope to achieve that. A solid business plan tells the lender that your business is being developed. With a clear plan and objective, that you know what you are doing. It builds the lender’s confidence in your abilities and encourages them to give you the loan.

Reason 4: Missing paperwork

When you are making your application for a business loan India. Make sure that you understand the paperwork requirement correctly before submitting it. Often, business owners are focussed on the business loan interest rate. And on keeping it lowand in theprocess, they fail to pay attention to the paperwork. A lender gets innumerable loan applications each day. He only takes up those that come with all the necessary paperwork needed. To verify various aspects and process the application further. Simply by failing to attach the relevant papers/ documents, you may reduce the chances of your loan being approved.

Reason 5: New business

Most lenders prefer to give loans to businesses that have been operating for a few years at least. This gives them the option of going through the business’ financials to see how healthy it is. What its outstandings are, how its profit- loss statement looks and other critical things. Typically, lenders may not be willing to entertain loan applications for businesses less than 3 years old. If they do give the funds, then the business loan interest may be high. Check if you wish to apply for traditional business loan. Or special start up loans if your business is in very nascent stages at present. 

Keep these factors in mind before you apply for a business loan. India to take your firm to the next level. Pay attention to all these aspects and work around them. So that the chances of getting your loan application rejected is reduced dramatically. Also remember that taking up a business loan is a big financial responsibility. Ensure that you are geared up to fulfil it without fail so that your financial reputation is not impaired. Managing your liabilities responsibly makes you a worthy borrower for future lenders.  

By Christopher

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