Take Initiatives to Expand Your Businesses with Small Business Loan

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As per recent reports, there were more than 63 million small and medium-scale businesses (MSMEs) operating in India in December 2020. These enterprises often resort to financial aid in the form of small business loans to fund various aspect of their daily operations. Nonetheless, accessing the funds is not an easy task as lenders set a strict set of eligibility criteria before sanctioning the credits, primarily due to increasing delinquency rates in this segment. 

The Financial Stability Report of the Reserve Bank of India revealed that by September 2021, the GNPA is estimated to rise by 14.8%. Individuals must therefore undertake some pre-emptive measures, besides knowing only about MSME full form, to enhance their chances of approval for such an advance.  

How to expand your business with a small business loan?

When it comes to availing an advance to realise the dream of business expansion, individuals must ensure that they adopt measures to comply with the adjoining eligibility requirements.

Following are some of the crucial parameters that one must comply with while applying for a small business loan. 

Determine the small business loan type 

Every business has unique requirements, and considering this fact, lending institutions offer different types of small business loans. Following are some of the most popular credit options that business owners can avail – 

  • Working capital loans
  • Machinery loan
  • MSME loan
  • Invoice financing 
  • Start-up business loan, etc. 

Besides this, there are several other loan types that lenders offer to eligible applicants. 

Decide the purpose of borrowing 

The second most vital aspect to avail and repay a small business loan is deciding the purpose of borrowing. It will also help business owners gauge the quantum they require, thus reducing the chances of over or under borrowing. 

Lenders also often ask for a draft of future business plans and projected investments. This helps individuals to calculate their EMI payable easily and plan efficient management of their finances beforehand. Thus, the proper evaluation of credit requirements comprises one of the steps of how to be a successful small business owner. 

Research available lenders 

Since almost all lenders offer small business loans in India, prospective borrowers need to choose one carefully to undertake an informed decision. 

Selected financial institutions offer business credit up to Rs.45 lakh with competitive interest rates. Individuals can also enjoy a flexible tenor of up to 84 months with this advance. 

Financial institutions like Bajaj Finserv also extend pre-approved offers that simplify the loan application process. Such offers are also available on a range of financial products such as business loans, personal loans, credit cards and several others. To check your pre-approved offer instantly, you will need to enter your name and contact number. 

Nonetheless, before settling for a lender, individuals should also check the additional fees and charges levied to ensure that that they do not end up adding to their existing liabilities.

Assess the credit profile 

Credit profile plays a crucial role in determining the eligibility of a borrower, as well as, the concerned business to avail advances. Individual borrowers mostly need to maintain a credit score of 750 and above to facilitiate easy approval of credits. 

Along with that, few lenders also sanction loans only to those with a business vintage of 3 years and more. Credit report and score are extremely vital parameters for micro, small and medium enterprises (MSME full form).  

Keep documents handy 

Documentation is an integral part of small business loan eligibility. Prospective borrowers have to submit a list of personal, financial and business-related documents to support their claims pertaining to eligibility. 

Few of the documents, as mandated by most lenders, are listed below. 

  • Identity proof – Voter ID, Aadhaar Card, PAN card, etc. 
  • Address proof – Utility Bills, Aadhaar Card, etc. 
  • Financial documents – ITR for last 1 year, bank account details of the previous 6 months, company balance sheet of last 2 years, duly audited by CA. 
  • Business-related documents – Proof of ownership, GST certificate, partnership agreement, business registration certificate, etc. 

Thus, apart from knowing the MSME full form, individuals also need to understand how to boost their eligibility to avail the funds required without much hassle. Along with that, they can also follow some tax savings tips for small business owners and save substantially every year.



Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.

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