To take your business to the next level, you will need extra cash to make it happen. And while it can be challenging to apply for a business loan in the UAE (or elsewhere, for that matter) thanks to stringent screening practices, you do not have to be overwhelmed.
It’s best to refrain from worrying and simply sit down to study and determine the best way to prepare for your application. It all boils down to how well you understand and go through the procedure to get the best terms for your business loan.
To get the right no-collateral loan for business that suits your needs, start by following these simple steps:
1. Identify your need
Financial lenders will be inquiring after the purpose behind your application for a business loan. And for budding or experienced business owners, the answer will typically fall under these categories:
- To get the business started
- To create a safety net
- To grow the enterprise
- To handle everyday expenses
A clear, solid and reasonable goal for putting the money to good use will inspire the financing institution to consider your loan application.
2. Find out if you are properly qualified
Here are questions to ask yourself to determine whether you are qualified to get a loan for your business:
● What is your credit score?
This is one important factor that will determine which loans are you qualified for. If your credit score falls below the threshold established by the lending institution you have approached, you are less likely to qualify.
● How long has your company been in business?
Besides your credit score, lenders will also consider your business’s length of operation. Often, you need to be in business for at least a year to qualify for a small loan and at least two years to be eligible for a bank loan.
● Does your business make enough money?
Most lenders require a minimum annual revenue for loan applicants. Be sure to have this figure ready and compare this to the minimum that your lender requires before you decide to apply.
● Can you make repayments?
Look at your business cash flow and evaluate how much you can afford for loan repayments every month. Your total income should not be under 1.25 times your overall expenses (including the amount you need to repay) in order to successfully pay back your loan.
3. Choose the right lender
Your reasons for taking out a loan will determine the type of business loan that you need.
When starting a business, it can be impossible to get a loan in the first year of your company’s operations, as previously mentioned. Most lenders need to see that you have the cash flow to support your ability to repay the loan.
It also helps to show that your company makes use of the right business banking solutions to ensure that all financial transactions and processes are in order.
To increase your chances of success when applying for a loan, it’s best to explore your options when it comes to the financing institutions to approach.
Turn to a bank if:
- You have a good credit.
- You are capable of providing a collateral.
- You have time to wait for the loan to push through.
4. Gather your documents
Once you have already compared and weighed your options, it’s time to apply for the business loan that fits your specific qualifications and needs. Depending on your chosen lender, you may need to submit a combination of these documents together with your application:
- Legal documents such as commercial lease, franchise agreement, etc.
- Personal and business tax returns
- Personal and business bank statements
- Business financial statements
- Project plans that showcase the direction that your business is taking
- Bank accounts for verification
5. Exercise patience
After submitting your application, you can expect to get an answer within two to four weeks’ time. Check the status of your loan application every week. But remember, it is typical for the lender to take time to process your application; they may even ask you for additional documentation if they see a need for it.
Banks and other lending institutions are happy to approve the right candidate and to help them succeed in their endeavors. After all, the interest you will be paying is a vital revenue for them. However, the task of becoming an ideal applicant rests on your shoulders.
The steps above will help you present an attractive case to your chosen financial institution. Moreover, it can demonstrate how approving your loan will unlock growth in your business, ultimately giving you the power to meet your repayment goals as well as succeed in all operations.