Businesses require funding for smooth functioning. Big or small, a sudden need for financing can prop up for any business. A popular choice for funding is debt options from different banks and other lenders. Business loans not only enable you to meet fund requirements but also offer tax savings as an additional benefit. The availability of loans depends on a variety of factors including the stage of the venture, competition in the market, the quantum of funds and credit score among others. Any lender assesses these factors before accepting or rejecting a business loan application.

A higher credit score indicates better creditworthiness of the borrowers. This means the higher the credit score, the more the chances of the business loan getting accepted. It also plays a crucial role in determining the interest rate and the tenure of the loan. So, if you are looking for a business loan, a good credit score should be on your checklist. This, however, doesn’t imply that a low credit score will mean a rejection of your loan application.

Lenders consider the credit score of the entrepreneur and the venture while processing a business loan application. Additionally, they also take into account aspects like the financial situation of the business, cash flow, the business plan and the quantum of the loan amount. If the lender is convinced of the remaining points and the repayment capacity of the entrepreneur, a low credit score would not come in the way of the getting an approval for the loan. The lenders, however, may charge a higher interest rate in such cases. Small loans are likely to get approval despite a low credit score compared to bigger borrowing.

Contrary to the common assumption, that business loans are only meant for bigger financing requirements, small borrowing, in sync with the company’s turnover and profit, is likely to get approval. In fact, many non-banking financial companies cater specifically to small loan requirements of businesses. Hence, going in for a loan with the current need of the business should be the priority of any entrepreneur while looking for debt options.

Another reason why many businesses are not sure of the loan option is the need to have collaterals. Like a good credit score, collateral will definitely help you in getting the loan processed. However, not having it doesn’t mean you can’t proceed with the borrowing. Several lenders offer unsecured business loans as well. Additionally, you can also try the options of merchant cash advances and unsecured enterprise loans.

In such cases, the applicant may be asked for a personal guarantee in place of collateral. In case of default, the business owner will be legally liable to repay the loan.

With the rise of the new borrowing avenues and the digitisation of the process, loan application has become easier and quicker. Borrowers no longer have to go through multi-tier processes, waiting weeks or even months to get approval. You can research the loan online to identify the lender that may be willing to provide funds as per your needs. This fast tracks the entire process and in many cases, loan disbursal is processed in just a few hours.