Despite the global meltdown, the growth of businesses in India is fast-paced. People working in enterprises, midsize companies, small businesses are called salaried employees. This segment is a favourite of financial institutions as they can sell their loan products to them.
However, there are other segments as well to which the banks/NBFCs cater.
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Personal loan for the self-employed
With the advent of a pleasant atmosphere for running businesses, India has seen a significant increase in the number of self-employed individuals. In this article, we shall talk about availing a personal loan for the self-employed and tips to ensure a hassle-free process during the transaction. Below are a few ways by which you can have your loan application approved if you are a self-employed individual:
Documentation
Perhaps one of the biggest mistakes a self-employed individual commits is not having proper documentation of financial records. The financial records may include the proof of business, profit/loss statement, bank statements, IT returns etc. A self-employed individual must maintain his/her account books properly so that the lending institution does not face any hiccups in approving the loan application.
A good credit score
A good credit score will always work in favour of the borrower. Banks and NBFCs typically get comfortable with the borrowing process if you have a credit score of 750 or more. There are a few self-employed businesspersons who deal with cash and hence, do not opt for credits, thus keeping their credit score relatively lower. Some also miss their payments, which is also a reason for a lower credit score. Hence, you need to understand the criticality of the credit score while dealing with a self-owned business so that you can opt for personal loans whenever you are in need. So, you need to clear your existing debts to apply for a new loan.
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Having a promising business plan
If you do not have a solid business plan, the banks/NBFCs have the right to reject your loan application citing terms and conditions. Hence, you need to have a solid business plan with a vision and mission statement, financial statements, and any factor that might influence your business. The idea is to present the business plan in a practical manner which will appeal to the lenders so that your loan application will be seamlessly processed without any hassles.
Getting professional assistance
The banks and NBFCs typically assess the previous year’s performance to approve the new loans for the current year. You should take the help of a professional auditor who will help in compiling your previous year’s business performance so that the financial institution receives a clear overview about your business and proceeds with the processing of your loan application.
Guarantor
There might be instances where your credit score is not on the higher side, and this should not serve as a reason for the impacting the loan application or personal loan interest rates. Hence you can present a guarantor to your financial institution with a better credit score so that the banks/NBFCs have the confidence to approve the application. However. If you miss the repayments, it will affect the credit score of the guarantor, and hence you should plan your repayment phase well in advance.
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Conclusion
Apart from the points mentioned above, the most critical factor is to choose a financial institution which provides personal loan for the self-employed and has very hassle-free loan processing that does not impact the way you run your business. Such a gesture from your lender will provide a boost to your business venture.
