The Best Guide on Business Loans for Women Owned SMEs10 Apr 2019
Women entrepreneurs are not an exception anymore. In India, around 200 per 1000 SMEs are run by women; and this is growing with each passing day. These 3.01 million (approx.) women-owned enterprises are making women more financially empowered.
These women enterprisers are full of energy and passion to make their radical ideas a reality. Backing them are many private and non-private financial institutions who are eager to fund their ventures by providing business loans for SMEs. They are dedicated to building opportunities for women in this sector by strengthening their commercial viability.
More than often SME owners lack the right knowledge about business loans which acts as a barrier in their growth. This guide aims at resolving that by laying out the basic, yet the most essential information for a smooth loan application process.
Things to Consider Before Applying for SME Business Loan for Women
A business loan for SMEs is pivotal in expanding the business to make it more viable. At the same time, the lenders would check for every risk of default. Which is why is it crucial that you consider a few points before applying for a business loan.
• Many financial institutions consider businesses for a loan that have been running for 2 years or more, however, clarity on the basics like what is the business about, what does it aim to do, who will it cater to, the amount required to invest, what will be the estimated turnover, etc. will go a long way in keeping business goals clear.
• Having short term and long term goals to monitor the financial health and growth of the firm.
• Well-defined use of the loan amount. Type of loan required, the amount, how will it be utilized, etc.
• Having a cash flow forecast to be sure about repayment.
• Understanding your business’s risk profile. A lender will always look for security, therefore ensure you have the absolute clarity on the matter.
• Duration of the firm’s inception. A few companies consider this as an important factor before lending out money.
How to Improve the Eligibility for Business Loan for Women?
Running a business takes a lot of determination, accurate and well-thought-out plans, and of course money to back it all. You might not require a loan right now, however, it is advisable to take note of the following to help expedite the process whenever you need one.
• Having a business plan inclusive of the product or service offered, market analysis, team structure, company description, GST, profitability prediction, etc. Having a business running for 2 years or more is also an advantage as many lenders look that as a reliability factor.
• Documented financial details of the business inclusive of account receivable (sales), accounts payable (outstanding amount debt), information on past and current loans, investment accounts, bank account details, audited profit and loss financial statements, etc.
• Documented personal financial details that might affect the loan’s eligibility.
• Documented tax return copies to help check the firm’s overall legitimacy.
• Having insurance to safeguard the repayment of the loan amount by reducing the individual’s risk.
• Most importantly, keeping track of the firm’s as well as the personal credit history and credit score. Having all documents in place, past records of loans and their repayments, etc, lead to a good credit score which is the imperative in not only determining the loan amount you are eligible for but also the processing.
• Having collaterals like business or personal real estate, business machinery or equipment, investments, etc.
What to do after you have received the business loan?
The journey doesn’t end on receiving the loan amount. As an SME business owner, you must also have a defined idea to help you potentially secure even a better deal the next time.
• Have a business loan repayment plan
• Look for business opportunities for early repayment
• Keep a check on your credit score
• Use your business loan wisely
When applying for a business loan, consider the 5 C’s that banks and financial institutions look into – additional capital required, business’s current condition, available collateral, repaying capacity, and overall character of the business owner. As important are these 5 C’s, equal emphasis should be on finding the right source like KNAB Finance who have a simplified eligibility criterion and even simpler loan application process to help you achieve your goals and take your business to the newer heights!