Kerala has the 11th largest GDP among the Indian states. More than 2.5 Lakh small-scale industries and MSMEs operate in this state as per 2015 data.
The majority of businesses here are concentrated in the services sector, especially information technology (IT). A considerable portion of Kerala’s economy is also dependent on the agricultural sector. Tourism and shipbuilding are two industries which contribute significantly to the GDP of this state.
Small-scale organisations are utilising SME or MSME loan to increase their future business outlooks against an increase in immediate liabilities. It is one of the ideal funding options to raise capital for your business. As a business owner, you only have to follow certain pointers to avail such loans and forward your organisations’ ventures.
Some of the easy ways to avail business financing include:
Improve your credit score
The credit score is essential whenever you opt for unsecured loans like business loans. These loans don’t require an asset backing or collateral. Hence, your CIBIL score becomes crucial for lenders to decide whether you are worthy as a borrower.
A credit score of 750 and above is considered ideal to establish your creditworthiness and repayment capabilities. Such scores also give you the option to negotiate your business loan interest rates.
Do make sure to check your CIBIL score before you apply to ensure your loan application is approved.
Have all the documents at hand
You have to provide a few documents to apply for a business loan; however, you have to make sure you provide all of them.
KYC documents (Passport, PAN, Driving License, Voter ID, Aadhaar, etc.)
Proof of business existence (GST registration certificate, partnership deed, Memorandum of Association, Articles of Association, RoC registration, etc.)
Financial documents (Balance sheet, Profit & Loss Account, etc.)
Income tax returns of the last year.
Bank account statement of the previous month.
Do note that this list is indicative; you may have to provide other documents when applying for a business loan.
Fulfil the eligibility criteria
NBFCs like Bajaj Finserv need you to fulfil only two business loan eligibility criteria:
Age between 25 and 55 years.
Business vintage of a minimum 3 years.
Clear existing debts
It is better to close any existing loans and pay off credit card debts before you apply for a business loan in Kerala. Doing so lowers your debt-to-income ratio or Fixed Obligations to Income Ratio (FOIR).
The debt-to-income ratio is the ratio between your fixed monthly obligations and income. Lenders prefer customers holding a 50% ratio or less – your total monthly debts must be 50% or less of your income.
Such a ratio gives you more room to accommodate your loan EMIs without them becoming a burden on your income.
Create a robust business plan
Presenting a sound business plan is sometimes essential in case of certain lenders. The plan provides an overview of your company, your products/services, and shows future revenue predictions.
A robust business plan is one of the crucial factors that can make you more eligible for a loan.
Apply for the right loan amount
The last step is to apply for the right loan amount. Doing so is critical as financial institutions might reject an application for large funds. And, such rejections lower your CIBIL score.
Using a business loan eligibility calculator is an ideal way to avoid the above. Feeding your business turnover, existing loans, net profit, and other data tells you the loan amount you are eligible to receive.
In addition to the above, make sure to have a few financial habits that can help you get a business loan in Kerala faster.