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The Startup India scheme was launched by the Government of India in 2015 with the aim of facilitating, funding, and handholding start-ups, as well as small businesses across the nation. Small business owners across the nation often find it tough to secure adequate funding, and the process can be cumbersome if you aren’t fully aware of the lender’s requirements and conditions.
Elucidated below are five easy steps you must follow to ensure that you secure a small business loan online:
- Strengthen both Business and Personal Credit Score: Your personal credit score is often used by lenders to gauge your capacity to repay your dues pertaining to loans, credit card dues, and mortgages. A good personal credit score, backed by timely repayments is a strong indicator of your ability to handle debt and plays a big factor in helping lenders decide whether or not to fund your venture.In addition to personal credit scores, well-established businesses also boast of business credit scores, accredited by agencies like Equifax, Experian, and Dun & Bradstreet, to name a few. By way of ensuring transparency and accountability in all your business transactions, you can then be eligible for SBA loans (backed by the government), as well as secure funding from banks and other lenders.
- Being Aware of the Lenders Criteria: Most lenders in the market look to gauge your businesses’ credit scores, number of years of operation, as well as revenues, and profits before they can agree to lend you money. To secure a small business loan online from government lenders, you must meet the norms of not having defaulted on any payments in the past, and your business model must meet the standards specified by these agencies.To be eligible for loans from banking institutions, good credit scores (both personal and business), revenue and profit streams, and adequate documentation are a must.
- Keep Financial and Legal Documentation Handy: To secure funding under the Startup India scheme, you must keep a list of documents handy, including – Personal and Business Income Tax Returns for the last 2 years, Bank Statements, Proof of Address of your business, Residential Address Proof, PAN card, AADHAR card, Business and Commercial Licenses, and Articles of Incorporation.
- Create a Business Plan: To secure a small business loan online, every potential lender in the market will require you to furnish them with an iron-clad business plan, to gauge how you aim to utilise their money to grow your business, and if you will repay their loan. A strong business plan must necessarily include a description of your company’s mission, product/service description, information pertaining to senior management, an in-depth industry analysis, plans pertaining to plant and facilities, details about current as well as projected financials, a SWOT analysis, and your marketing strategy.
Collateral: If you wish to secure a small business loan online in India, you are legally required to back your loan request with collateral. This can be in the form of real estate, plant, inventory, or machinery. A requirement for collateral is made so that if in case you default on your loan repayment, the lender can cover their losses. If by chance your business can afford to offer collateral, you can also choose to opt for an unsecured loan, one that eliminates the need for collateral.