How to Get a Business Loan to Fund Your Expansion: A Growth Strategy Guide

Growing your business is always an exciting milestone. It signifies success and the ambition to achieve more. However, growth usually requires additional capital. If applying for a business loan is on your to-do list, then you are in good company. Many small and medium enterprise (SME) businesses in India rely on loans to fuel their business. 

This blog simplifies the process of applying for a business loan in India, making it less daunting as you attempt to grow your business.

Why take a business loan to finance an expansion?

Business expansion typically involves increasing production capacity, setting up additional branches, investing in advanced technology, or entering new markets. However, these initiatives require a lot of capital. Business loans are often the best option for funding expansions for the following reasons: 

Access to capital: Expansion loans provide immediate funds without depleting your cash reserves.

Hassle-free repayment options: Loans terms can be tailored to your business needs so that repayments are hassle-free and manageable.

No dilution of ownership: Loans do not require giving away of control or ownership unlike equity funding.

Available business loans in India

It is important to know the types of available business loans before starting the application process. Here are the main types: 

Term loans: Ideal for purchasing machinery or establishing new infrastructure.

Working capital loans: Help run day-to-day activities during the expansion process.

Equipment financing: Covers the cost of acquiring machinery, technology or other forms of tools for the business.

MSME loans: Designed mostly for micro, small and medium-sized enterprises in India.

Overdraft facilities: Flexible loans allow you to withdraw amounts exceeding your account balance.

How to apply for a business loan?

Applying for small business loans in India can be a tedious process. This step-by-step guide simplifies the procedure.

Evaluate what you need

• Establish your expansion objectives and also the amount that is necessary.
• Be clear about the type of loan you need and its relevant features.

Prepare the necessary documentation

• KYC documents: Proof of identity proof and address proof
• Business proof: Submit documents like business registration certificates, trade licence, etc.
• Financial documents: Include invoices, tax returns, bank statements, and profit and loss statements.
• Collateral details: For secured loans, provide asset-related documents.

Check eligibility criteria

• Lenders want your business to be operational for at least three years.
• It is important to have a fair credit score (ranges at 700+).
• You must ensure that constant revenues and profits are prevalent in the accounts.

Explore the different lenders

• Compare interest rates, loan tenure and so on.
• Consider traditional banking, NBFCs as well as digital lenders.

Application submission

• Submit applications online or offline.
• Attach necessary documents.
• Wait for approval (may take days to weeks).

Eligibility criteria for business loans in India

Most lenders in India evaluate applicants based on these criteria:

• Business age: Minimum three years.
• Turnover: Affidavit of continuing business operation and annual audited financial statements.
• Profitability: Prove your ability to repay the loan.
• Credit score: A score of 700 or higher is generally accepted.
• Collateral: Secured loans may require assets as collateral.

How to increase your chances of approval?

Meeting the basic criteria is important. These basic steps can boost your approval chances: 

• Build a good credit history: Pay bills on time and maintain low credit utilisation.
• Maintain organised financial documentation: Comprehensive and current financial records inspire lender’s confidence.
• Choose an appropriate loan product: Match the loan type to your business needs.
• Clearly define loan purpose: Explain how the loan will be utilised and the expected returns.
• Compare multiple lenders: Find the best terms by comparing different offers.

Common problems and possible solutions in applying for a business loan

Entrepreneurs often face problems when applying for business loans. Here’s how to address them: 

• Poor credit history: Pay off existing debts and stay consistent with payments to improve your credit score.
• Inadequate paperwork:  Create a checklist and ensure all documents are ready.
• Inadequate collateral: Explore unsecured loans or alternative collateral options.
• High interest rates: Research better offers or negotiate your loan with lenders.

Advantages of business loans for small business

When utilized wisely, small business loans can yield several benefits: 

• Growth potential: Expand operations, enter new markets, or invest in technology. 
• Effective cash flow: Maintain liquidity, allocating funds for expansion.
• Competitive edge: Improve infrastructure and gain advantage over competitors.

How can TallyCapital help?

Navigating the loan process in India can be daunting, but with the right partner, it becomes smooth. TallyCapital offers customised solutions to meet your business needs:

• Professional consultants to guide you in getting a loan.
• Easy and fast loan approvals 
• Transparent terms and conditions with competitive interest rates.

Conclusion 

This step-by-step guide equips you with the knowledge to confidently approach your first business loan application. Securing the right loan isn’t just about funding- it’s about building a partnership that supports your vision. 

At TallyCapital, we understand that every business is unique. We don’t believe in cookie-cutter loan options. Instead, we focus on your specific needs, offering a range of customised business loans to fuel your growth. Whether you’re looking for a small boost to cover cash flow or a larger amount to drive expansion, we’re here to make the process simple, transparent, and stress-free.