Factors to Consider When Preparing to Avail a Corporate Loan


Corporate loans have for long been a steady source of business financing for ventures of differing sizes and scales of operation. A spur in the number of MSMEs in India has only pushed for a wider financing need, making a corporate loan more validated than ever. With the expanding financial market, availing of these loans has been simplified to, and eligibility requirements are reduced to minimal.

Despite the widespread availability of these loans and advances, a business must be well-prepared to avail of the necessary financing so that any running hurdles are eliminated or minimized. Below given are thus a few factors you should take care of when availing of a corporate advance to secure funding seamlessly at favorable terms.

A Concrete Business Plan

You must have a concrete business plan in place when applying for a corporate loan. A suitable business plan not only makes a positive impression on the financial institution you are borrowing from but also allows you to assess your future business prospects and assists in favorable financial decisions accordingly.

For a suitable business plan, you can include factors like your business stature in the long run of say 5 to 10 years, market expansion plans, new office establishment, targeted revenue generation, etc.  

Streamlined Cash Flow Identification

When availing funds from a financial institution, you need to present the business as typically eligible for timely and full repayment of the loan liability. If a business is eligible to fulfill any liability or not can be easily identified by checking its past cash flow and future projections.

You must thus make sure to keep the cash flow statement of previous years ready along with identifying the future sources of cash flow for your business. Better yet, make your application more impressive by identifying the sources that you plan to allocate for your corporate loan repayment.

Credit Score

A credit score is a critical consideration you must make to imply higher weightage to your ability for the required financing. A credit score is a 3-digit number that serves as a numerical representation of your past credit behavior and the risk involved. It is assigned in a range of 300 and 900, with 750 serving as the ideal credit score for availing funds.

Before applying for your business loan, you must make sure to check your personal as well as your business’s credit score and see if it touches the minimum mark of 700. If not, you can plan ahead to take the necessary steps that would help improve your credit score in the long run. Some of the steps can include making timely and full repayments, maintaining a balanced credit mix, keeping the debt to income and credit utilization ratio at less than 50% and 30% respectively, etc.

Existing Liabilities

Before applying for a corporate loan, you may also see repaying any existing loan in full with lump sum fund availability. Doing so shall improve your repayment capacity, allowing you to avail necessary funds and negotiate favorable terms.

Also, decide thoughtfully on whether you need a secured or an unsecured corporate loan to fulfill your business’s financing needs. Meet all eligibility and document requirements before applying to improve your chances of hassle-free approval.

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