Challenges Faced by Entrepreneurs to Avail Business Loans

Starting a business is challenging. Ask anyone who is trying to set up a business or a seasoned entrepreneur, you'll get the same answer! Especially, when you are out to build a new business, you are bound to face a lot of struggle with respect to arranging for capital.Every business requires funding to take off and as an entrepreneur that should be your key focus - to arrange for capital. Business loans are loans given out by banks and a lot of NBFCs today to entrepreneurs for business purposes. But it is not easy to get a business loan.There is an eligibility criteria in place which decides whether you qualify for the loan or not. So, let's look at why exactly do entrepreneurs struggle with availing business loans - 1. Lack of experience: A lot of banks these days deny loans based on the lack of experience on the part of the entrepreneur or the management team. A pre-requisite to apply for a business loan is a minimum experience of 1-2 years in the profession/line of business. 2. Lack of collateral: Entrepreneurs can get a business loan against an asset or any other form of collateral. This reduces the risk factor and helps process the loan faster. However, banks can deny a loan if there is no collateral in place. 3. Bad Credit Score: One of the fundamental eligibility criteria to qualify for a loan is to have a good credit score . A good credit score implies good credit history, which means your credit-worthiness increases and chances of you getting a business loan are higher.However, if this score is bad and there is a history of default in payments, then you may be at the risk of being rejected for a loan. 4. Lack of a business plan: Banks love to see projected growth and detailed business plans along with an application for a business loan. Entrepreneurs who do not have a clear vision of their business or aren't invested in planning may be at the risk of not getting a loan. 5. Weak cash flow: Banks assess the capability of a business/business owner to repay the loan amount back in time. One of the documents required during the loan application process is the cash flow statement which displays the monthly income and expenses of the business. In case of irregular incomes or sporadic cash inflow, banks may reject your application for a business loan.

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