Any business needs funds to grow or expand its company. There are numerous sources from which one can obtain access to capital. But this could be a little challenging as one needs to consider several factors.
Let us learn more about the potential causes of business loan rejections and how to overcome them.

1. Credit score
If you have taken a lot of credit and loans, your credit history will show a low credit score.
If your credit score is low, this could lead to financial institutions rejecting your loan application.
However, if the business is new, there will be no history highlighting poor credit scores.

Tap the link if you wish to know how you can improve your credit score: https://trucapfinance.com/how-to-improve-your-credit-score/

2. Business potential to repay the loan
Financial institutions need the past performance history of the businesses. A company’s cash inflows from current activities and outside investment sources are cross-checked. The financial statement shows your capability to repay the loan after removing the operating expenses.

3. Applied or enquired about the loan from multiple sources
When applying for a loan, the financial institution takes note of all your past performances, including your previous loan application and debt history.
The higher the debt, the lower the chances of getting a loan. Your limited ability to pay back the loan’s principal and interest may raise suspicions in the lender’s mind.
The lender will reject your application because they consider it to be risky.

4. Unclear purpose of the loan
Before requesting a loan, the firm must answer questions such as “why” it needs one, “will the loan be used for the growth and advancement of the company,” and “whether there is a clear strategy and plan connected to business expansion.”
There is a greater possibility of rejection if the lender cannot clearly understand your development plans.

5. Documentation
If the documents are not false or fill incorrect information in the application form, the lender may instantly reject the requested loan amount. Filling out the forms involves careful attention.

Advice on how to handle it-

• Fill the form with proper and correct details, strongly suggested to keep all the documents in hand and then start filling. Do not panic or get impatient while filling out the form.
• Add collaterals for repaying the loan. If you cannot pay the loan, collaterals can help you for easy repayment. Gold can function as the best collateral you can use in times of emergency.                                                        Know more about gold loans, check the link:

• Establish definite objectives and plans for the growth of the company for which you are seeking funding.
• You can boost your income by reducing unnecessary spending and working on improving your personal and professional credit scores. To do this, pay all your bills on time, pay back all past loans, and maintain strong financial standing.

Conclusion

Avoid applying for a loan right after having one rejected because doing so could damage your credit score.
Ideally, you should wait between 30 and 45 days before applying

A significant source of employment for India’s expanding population is the Micro, Small, and Medium Enterprise (MSME) sector, which accounts for over 40% of the country’s GDP. In acknowledgment of the importance of MSME growth in the post-demonetization climate, the government has launched new business funding schemes and improved existing ones. Listed below are the examples of such government loans for small businesses in India:

MUDRA Loans
The Micro-Units Development and Refinance Agency organization, the government, provides financing to micro-business units. “Fund the unfunded” is the guiding principle of MUDRA loans.
All the banks offer MUDRA Loans. These loans were significant in developing the idea of low-cost finance for micro and small firms.

The MUDRA loan category is listed below –
LOAN CATEGORY AMOUNT
1. Shishu Loans- Up to Rs. 50,000
2. Kishor Loans- 50,000 to 5,00,000
3. Tarun Loans- 5,00,000 to 10,00,000

Loans by National Small Industry corporation
To provide financial, marketing, technological, and other pertinent support for the development, growth, and expansion of MSMEs, the MSME Ministry established the Government of India Corporation. The purpose of this corporation is to encourage the growth of the MSME sector in India, primarily through the two kinds of government business credit programs: (a) the Credit Support Scheme and (b) the Marketing Support Scheme (for procuring raw materials).
It offers lending facilities to MSMEs directly or through agreements with other banks.

Udyogini
A program called Udyogini, which means “women empowerment,” has been started to empower and assist Indian women in commencing their businesses. The Women Development Corporation implemented the program on behalf of the government.
Up to Rs. 15,00,000 is the maximum loan amount offered under this program. The criteria for availing of the loan are listed below:
· The age range for a woman entrepreneur should be 18 to 55.
· The family’s annual income cannot exceed Rs. 15,00,000.
· For physically impaired or widowed women, there is no upper-income restriction.

Requirements to avail of the loan:
· There are no processing fees or collateral requirements.
· Passport-sized photos
· A birth certificates
· A below-poverty line card
· An Aadhar card
· Proof of their caste
· A passbook or bank account
· A ration cards
· Documentation of their income

The Stand-Up India Plan
The Stand-Up India project seeks to support women and members of Scheduled Caste or Scheduled Tribe in starting their businesses by assisting banks in providing loans ranging from Rs. Ten lakhs to Rs. One crore.
The specific borrowing company can be active in the trading, service, or manufacturing sectors. For non-individual businesses, a woman, a person of color, or someone with a woman’s ancestry must own at least 51% of the shares and control.

Credit Guarantee Fund Program for Small and Micro Businesses (CGFMSE)
The government of India introduced a lending program called Credit Guarantee Fund Trust for Micro and Small Enterprises (CGFMSE), which enables MSME enterprises to get subsidies through loans without collateral. Both new and existing businesses may apply for these loans.
Funding under this program is available for working capital loans up to Rs. Two hundred lakhs, as well as qualified women entrepreneurs. Enterprises engaged in manufacturing, including educational institutions, retail businesses, training facilities, self-help organizations, and service industries, are eligible to receive money under this program.

Small and medium-sized firms can register as MSMEs using Udyog Aadhaar, also referred to as Aadhaar for Business, a unique 12-digit government identification number provided by the Ministry of MSME.
The Government Of India does not approve a sole proprietor’s business. Udyog Aadhaar enables a sole proprietor to receive a distinct identity and official registration with the Government of India, which validates the existence of his business.
Is the Udyog Adhaar card compulsory?
Even though the Supreme Court has not yet added Udyog Aadhar to its list of requirements, it is still necessary. To be recognized as an MSME or register as a new MSME business is an essential step. Additionally, registration with a Udyog Aadhaar might benefit greatly.
All businesses categorized as micro businesses under this Act have an investment minimum of 1 crore INR and a turnover limit of up to 5 lakh INR. Small enterprises have yearly revenues between Rs. 5 lakh and Rs.50 crore or investments between Rs. 1 lakh and Rs. 10 crores. The maximum allowable turnover or investment for medium-sized firms is 100 crore INR.
Without it, new businesses would not be able to utilize Udyog Aadhar benefits. Therefore, completing the Udyog Aadhar registration is preferred. It is, therefore, preferable to complete the Udyog Aadhar registration.

How to apply for Udyog Adhaar Registration?
The registration process for obtaining a Udyog Aadhaar is simple. For the registration, you do not need to get the form attested by any professional. The Government has not imposed any registration charges.

You need to follow the given below steps to do it yourself.

Udhyog Adhaar Card MSME/SSI online registration
Step1: Visit the official website- https://bit.ly/UdyogAadhaarregistration
Step 2: Enter your Aadhaar number. In case of a partnership, the Partner applying Udyog Aadhaar shall give his Aadhaar number. In the case of a company, the Authorized signatory shall submit his Aadhaar number.
Step 3: Enter the OTP received on the number linked with Aadhaar Card.
Step 4: Fill out the Udyog Aadhaar Form,
(Name of Enterprise– Name of the legal entity to conduct business. One applicant can have more than one enterprise doing business and register for a separate Udyog Aadhaar with the same Aadhaar Number.)
· PAN Number- Mandatory for LLP, Company, and Co-operative Society. Optional for the rest.
· Location of Plant
· Official Address– Address of the business, mobile number, and email address.
· Date of Commencement– The date on which the business started.
· Previous Registration Details– any prior MSME/SSI registration, if appropriate.
· Bank Details– IFSC Code and Bank Account number of the company.
· Activity– Manufacturing or services that the company does.
· NIC Code– NIC Code entered from the National Industrial Classification (NIC) handbook.
· The person employed– number of people working in the business.
· Investment in Plant & Machinery / Equipment– Amount of money invested in machinery and equipment by the business.
· Details of the District Industry Center nearest to the business

Step 5: Once you have filled out all the details, click on submit.
Step 6: Enter the OTP received on the number linked with Aadhaar.
Step 7: Enter the code on the screen for final submission.

What Are the Benefits of Udyog Aadhaar for Small Businesses?

The growth of the Indian economy depends heavily on the micro, small, and medium-sized businesses there. By FY-2025, the MSMEs’ share in India’s GDP will increase to 40%, according to the All India Management Association (AIMA). The Indian Government established the Udhyog Aadhar Facility to aid in the growth of MSMEs while also recognizing their relevance.
A specific identifying system for these firms has been introduced, called Udyog Adhar. This facility was introduced in 2015 by the Ministry of Micro, Small, and Medium Enterprises. Similar to the Adhar card, Udyog Adhar is a certificate with a 12-digit registration number.

When we talk about business loans there are a lot of presumptions made by small, medium, and large-scale businesses that are more myths than mere presumptions. A business loan is like an unsecured fund provided by a bank or a Non-Banking Financial Company (NBFCs) to different scales of businesses to help them cope with their day-to-day expenses, cost of raw materials, marketing, and advertising expenses, etc. 

The rate of interest provided by the banks or the NBFCs purely depends upon the scale of business they operate on, its revenue, profitability, and so on. Nevertheless, many aspiring entrepreneurs have embedded certain myths regarding the issue of business loans. So, here we are to clear up those myths and help you kick start  

• The myth of perfect credit history 

Maintaining a good credit score is good but then maintaining it perfectly is a myth. Having a good credit history increases the chances of you getting a business loan, but you do not need to have a squeaky-clean credit history to get yourself noticed by the lender. 

Also, the credit score of the business depends on the type of loan you are applying for. Short-term business loans provide you with a good credit score when many lenders want a score above 550. 

 

• You need to be big to apply for big loans 

Many small business owners wrongly believe that applicants seeking business loans should only ask for a substantial amount of money and that small loans don’t apply to them. Certain non-banking financing organisations and microloan providers concentrate on the small business owners who want business loans, in contrast to the traditional banks’ preference for large-ticket business loans, which are worthy of their time and money. 

It’s not a matter of great concern if you are a small business and expect a bigger loan. One thing that is a matter of concern is making the lender believe that you are trustworthy and that you will be able to repay the debt or the loan.  

 

• Too much expectation can get you rejected 

The amount of the loan has got nothing to do with the fact of getting approval or not. It purely depends on the evaluation of your cash flow and the surety that you give to repay the loan back backed up with proof. 

 

• There is only ‘A’ kind of business loan available 

There are numerous varieties of business loans, each with unique advantages and goals. The most typical type of loan is a term loan, which has a longer repayment period. Loans for working capital assist both small and large organizations in filling gaps in their daily cash flows. Then there are overdraft facilities offered against securities or other types of collateral, such as fixed deposits, and equipment financing designed expressly for the acquisition of machinery and equipment. Business loans differ from one another in terms of the interest rate and other loan terms. 

 

• A business is needed to get a business loan 

This is not true. Anyone can apply for a business loan if they have the goal to start a business. Yes, of course, it becomes easier for the existing businesses to get approved for the loan application because of the longer financial track, but that doesn’t mean that you cannot start a business with the same. 

What is a credit score?  

A credit score is a depiction of an individual’s creditworthiness to repay debt. It shows the ability of the borrower to pay back the borrowed amount to the potential lender. This score usually ranges between 300-850 where the higher the score the greater chances to get a loan with better interest rates.  

A credit score is based on the credit history of the borrowers. India has four major credit information organizations that are licensed by the RBI (Reserve Bank of India). These are CIBL (Credit Information Bureau Limited) of India, Experian, Equifax, and Highmark. Out of these CIBL’s credit ranking is the most popular.  

These credit bureaus calculate the scores of the borrowers through credit history including several factors such as the number of accounts open, the total level of debts, repayment, credit requirements, length of your credit history so on and so forth.   

TIP: When you apply for a loan in a Non-Banking Financial Company NBFC’s, make sure you have a high credit score. This will ensure you get your desired loan amount, with lower interest rates and your desired term to repay the same.  

• How to have a good credit score?  

You can have a good credit score generally by maintaining certain credit repayment factors such as:  

1. Timely payment of Equated Monthly Instalments (EMI)  

1. Full payment of EMI’s  

1. Regular payment of credit card dues  

1. Lower credit utilization*  

*Credit utilization ratio is the amount or proportion of the total credit card limit used by the credit cardholder.  

• What damages your credit score?  

Some factors that highly affect your credit card scores:  

1. Delayed payments (even one)- Delayed payments make your credit score suffer. With even one delay your credit lending authorities would notify the credit-reporting agencies of the same.  

1. Application for more credits when you already have one.  

1. Holding high credit card values i.e., when your credit card balance is close to your credit limit. Lower the credit balance, better.  

1. Bankruptcy i.e., unemployment leading to missed payments.  

1. Not maintaining your credit report.  

How does your credit score impact your loan application?  

Credit score affects directly to your loan application. Higher your credit scores the more eligible you’ll be to get approved for the loan you need.   

These are some factors that you didn’t know would affect your credit score:  

• A credit score plays a major and important role in the approval of the loan amount. It is as important as your employment history or salary script.  
• Loan repayment history. Good repayment history= good credit score.  
• The loan account is being charged off. When you fail to pay your bills on time you are charged by the creditors a sum that is usually deducted for non-payment of the bill or late payments. This deduction is one of the worst incidents that may reflect on your credit scores.  
• Third-party involvement. When you fail to repay the loan amount at all sometimes, the lenders use third-party involvement for the amount collection. This affects your credit score deeply thereby creating hurdles for your loan approval.  
• Closing your credit cards. Even if your credit card is not in use make sure you hold onto it as closing your credit card. If you apply for credit card closure with a balance outstanding in it. The value limit of your credit card becomes INR 0.00. That affects your credit scores.  
• Keep a check on your credit report. Regulating and keeping a check on your credit report helps you get aware of your credit scores on a regular basis. And that helps you improve your credit score accordingly.  

Good credit history is the condition for achieving a higher credit score. Now, how to maintain a good credit history?   

Credit history is determined by certain pieces of information such as the number of credit cards you use or the number of loan accounts you hold, the frequency of the repayment of your credits, the balance you hold in your credit account, and so forth.  

Though it seems facile it demands a little bit of financial understanding. It is irrelevant if you are a beginner or already on the run, what matters is how well you manage your credit score and that you seek improvement.     

So here are some ways you can improve your credit score with some insignificant maintenance:  

1. Keeping an eye on your credit reports  

Regulating your credit report in a timely manner helps you detect the loopholes in the report that probably is bringing your credit score down. This will help you understand the sequence of events that are hurting your credit scores such as payments and defaults. Sometimes it may be the case that you have done your part sincerely, but it isn’t reflected in your credit score. In that case, you should update the same to your credit rating agency.  

1. Curtail sending regular applications for loan account  

It may be that your credit application was rejected by the lender, or you want to open a new account to construct your credit file. Whatever might be the reason make sure the frequency of it is limited. A frequent credit application creates a hard pull i.e., the creditor looks at your credit file to calculate the risk you possess as a borrower. This doesn’t make a considerable effect on your credit score, but a lot of them hurts in the long run.  

1. Timely repayment of your credit dues  

Checking your due dates and making a timely payment should be the first step toward maintaining your credit score. Staying disciplined while paying your credit dues keeps your credit history stable and helps you hold a good reputation in the books of the lenders or the creditors.  

1. Avoid high credit utilization   

Always take into consideration the credit utilization ratio, as it directly impacts your credit score negatively. Try and keep your credit utilization value within 30% as any number over that shows that you are not financially stable. Having a high credit utilization ratio portrays to the lenders that you are credit thirsty and that eventually lowers your credit score.  

1. Never borrowed funds in the past. Here’s what you can do  

If you have never borrowed any funds in the past, you will not have any credit history. Not having any credit history potentially would lower your credit score so, to maintain your score you should prefer taking mixed loans.   

Mixed loans or mixed credit includes secured as well as unsecured loans for a long and a short time to strengthen your credit score.  

1. Debt consolidation  

A debt consolidation loan is something that you can opt for when you have multiple debts on your plate. You can ask your credit union or bank to consolidate all your debts and hence you make just one payment for all of them. This can act as an advantage for your credit score.  

1. Try and maintain old credit cards  

Opting for new credit cards or loan accounts every time you borrow a debt can harm your available credit balances on your existing credit card. This may harm your credit history thereby ruining your credit score.  

1. Long repayment tenor = Good credit score  

Whether you opt for credit or loan per se, try to take a longer repayment tenor. This will help you with lower interest rates and would leave a good impact on your credit history. And by now we have understood that a good credit history directly impacts your credit score positively.  

Introduction 

eKYC also known as Electronic Know Your Customer is an extension of the usual or the offline Know Your Customer (KYC). It is used to collect personal and professional information of the customers who are linked with the organization. The two eKYC and traditional KYC mark a major difference which is the scale of difficulty. The Electronic Know Your Customer is easier when compared to the traditional offline KYC method. 

Here is everything you need to know about the Electronic Know Your Customer (eKYC) verification- Meaning, advantages, documents required, and eligibility. 

 eKYC Meaning and How it works? 

eKYC is a digitalized process of verification of the customers to ensure the data they provide is correct in nature before they get connected to a financial institution. It subtracts the face-to-face verification and eases the process whole together. eKYC was introduced to address the issues faced by banks of being used by criminals for money laundering activities. 

So, to initiate the eKYC process one should have the access to their Aadhar card and if the financial institution you are linked with is authorized by the UIDAI (Unique Identification Authority of India) you can easily opt for eKYC verification. 

Advantages of eKYC 

eKYC promotes an easy, safe, fast, and cost-effective way of paperless verification of the customers. This makes the verification process very transparent and trustworthy for the customers to share all their essential details. 

• Cost-effectiveness- While going through the traditional way of seeking KYC there is a lot of investment done in the workforce and the inventory. There is always direct contact between the bank and the customers for identity verification. On the other hand, it is not the same with eKYC everything is in digital mode i.e., at your discretion. It can be done anytime 24*7 without any physical movement of the customers. 
• Fast service- eKYC service is delivered extremely fast when compared to the traditional KYC method. It is because the customers don’t have to go physically to the bank to fill out forms and do the other needful services everything can be done online itself. 
• No papers needed- When a customer decides to join hands with a bank to apply for a loan or investments. The bank needs the customer’s identification to make sure the customer is valid and that the funds of the bank are in safe hands. For this, the bank would need the customer to visit the bank physically for all the documentation processes. But with the help of eKYC, that process becomes fully online thereby subtracting all the paperwork. 
• Safety and Security- When talking about sharing personal or professional information with the bank, we always have a second thought about the information getting tampered. But while opting for eKYC this concern would not be a concern at all because everything is digitalized and hence safe and secure. 

Documents needed for eKYC 

While submitting the document you can be assured of your documents safely reaching the required place as the mode will be online. The thought of losing your documents or getting them tampered vanishes. 

The following documents are required: 

• Passport sized photographs 
• Personal cheques 
• Aadhaar card for identity as well as address proofs. 
• Other documents such as PAN cards, Voter ID, etc, can also be used. 
• When the account holder is a minor, the person handling the account will have to submit the ID proofs. 

eKYC Eligibility 

To be eligible to do an eKYC all you need is an Aadhar card by you. The Aadhar number is everything you need to register yourself with any government-run facility. The Aadhar number is a unique identification number that contains your personal as well as professional information. 

If by any chance you lack an Aadhar card, contact the UIDAI (Unique Identification Authority of India). You will get it in no time after accurate authorization by government agencies.