How to Apply for a Loan : A guide for SMBs

BANGALORE, INDIA:

In order to materialize the ideas the entrepreneur should have a sound financial backing. Often, approaching a bank for a loan has been a tedious affair. For a new entrepreneur. This article will throw light on some of the concepts related to applying for a loan.

Types of loans : There are broadly two kinds of loans available for an entrepreneur: Term loan and Working Capital loan.

Evaluation
Banks often reject loan applications from start-ups, on the grounds of inexperience on part of the entrepreneur, no collateral security, improper project report, etc. He needs to have a clear idea of the kind of business he wants to start and also take into consideration the market demand for his product in the particular location.

Also read: Govt to infuse Rs. 300 cr in NSIC to help SMEs

List of documents required by banks

• Feasibility/Project report on various aspects of the venture
• Road transport permit  
• License from the Government
• Sales Tax number  
• Registration with the District Industries Centera
• Pin number  
• Clearance from pollution control board
• Feasibility report from the electricity board
• Balance sheet certified by Chartered Accountant
• NOC from local authority
• Other documents required for security against loan (Land and Building, Plant and Machinery)

Generally, an entrepreneur with collateral finds it easy to get a loan. Loans secured against collateral come at lower interest rates. However, for entrepreneurs who do not have anything to offer as collateral, securing loan becomes heavily dependent on the project report. The bank makes a careful assessment of the report, analyzes demand and supply gap, verifies professional qualifications of the promoter, etc. "The thing with banks is, they lend money to persons who can prove that they do not need it.

Source: www.dare.co.in