Acquiring a business loan is one way the bank uses to increase its income. As compared to other personal loans, business loan do have much paperwork to fill. This is to ensure that the bank will not hand over a loan to any Tom Dick and Harry upon requests, there is a criterion followed before the loan is granted. The bank has to ensure that you are in a position to pay back the loan with interest at the agreed time.
With the increase of micro finance firms rapidly growing, banks are not the only ones who grant loans these days. To establish stability and credibility in these firms they have to offer a business loan with low-interest rates so as to make their offer attractive and be ahead of their competitors. Their interests rates are not only low but they also provide an equally considerably long period of time to pay back in installments.
a business loan is best advised to be approved to financially responsible person who will not have a hard time paying back the loan. Once you apply for a business loan, you offer your business details and financial statements to the bank. The bank then takes the time to go through your credit and analyze whether you are credible for the loan. They consider factors like recent credit applications be it the same bank or a different bank as well as the reason was given for acquiring that loan. Any outstanding debt that they may have at the time the loan request is made, the presence of any savings or lack thereof whether monthly or annually and they also consider any credit cards that are at their limit or beyond their limit.
It is simply a precaution the bank takes before approving the loan. In most banks, once the application for the loan is made, it may take about three to nine business days. The main aim of a business loan is to aid an individual to raise money in a time of crisis or emergency. It can also help to cater for certain needs of an individual within an earlier time frame than the person would have anticipated. Unlike personal loans, a business loan should charge low-interest rates because the reason to take up the loan in the first place was not to generate a profit. By giving business loan at low-interest rates it creates a good relationship between the business clients and the bank, this way when trying to make an investment in future the client will definitely look into the bank’s business loans instead of going to another bank.
A business loan also gives the business a credit history that will make eligible for other bigger loans in future. By charging low-interest rates on a business loan, the bank is sure to attract a good number of clients. The clients generate better business for the bank especially when their customer service is excellent and leaves the client satisfied.
The biggest factor will of your course be your credit score and your credit history. If you’ve behaved well with your credit in the past, they’re more likely to lend you the money and normal to low rates. The other big factor will be your income if you make plenty of money and you can prove it the bank isn’t going to mind lending you a couple of thousand dollars to get your new business of the ground.