You need money to invest first and then only you can expect to earn more money. So are the top 4 reasons why should you take business loans.

4 Reasons why your business might need a Business loan

Expansion of your business

  • One of the most obvious reasons why should one consider a small business loan is to invest in an expansion opportunity for business.
  • When your business is booming and the growth is continuing, your business can help ensure that your profits don’t decrease.
  • Undoubtedly, further growth may have many cost high for
    • Advertising
    • New property
    • Building renovations, etc.
  • Loans can cover the expenses that one needs for expansion of the business. The business loan for startups in India is available at a cheap rate.

To Increase Inventory

  • Inventory is of the most difficult to maintain expenses in many industries.
  • The problem is that you have to invest in the products before the customer purchase it.
  • Once you have started operating, you will need to expand and replenish your inventory so as naturally to keep up with demand and to provide better options to your customers.
  • By taking a business loan to you can maintain a good inventory without harming the cash flow.

Cash Flow

  • Cash flow is the biggest challenge faced by small businesses, and it is always a problem when you have to deal with customers who don’t pay for services.
  • These issues even cause a bigger problem when the factor in the regular costs of your inventory, staff, utilities, and rent or mortgage.
  • A business loan can help to provide a healthy cash flow system and can the business stay afloat. There are lower interest rates for small business loans.


  • Every business needs some equipment to work and also to increase its business and profits.
  • With equipment being apart business wear and tear with use and age of equipment is normal.
  • Sometimes unplanned expenses like the repair of the equipment or buying of new equipment can break your back or at times throw the business out of gear.
  • Business Loans help you to cope with such unplanned expenses and help you to manage such expenses with ease.

Documents required for a business loan

Informational Documents

Basic Personal Information

The first page of your business loan application will ask for your basic personal application. You should have all the information beforehand. There must not be any problem when you are filling the form.

Basic Business Information

Information like business tax ID, business location, the number of employees is next to personal information. You may also have to provide a copy of the lease agreement.

Basic Legal Documents

The lender may ask you to produce your past legal documents like

  1. Business formation documents
  2. Business licenses
  3. Records of pending legal documents
  4. Previous bankruptcy records, and
  5. Contracts with other businesses.

Personal and Business Credit Reports

Your credit score and credit history constitutes a major part of your ability to get a small business loan. It is helpful to get your business and personal credit reports so that you can estimate your creditworthiness.

Your Resume and the Resume of Your Management Team

If you are starting up or acquiring a business, lenders want you to have a minimum of 3 to 5 years’ experience.

Financial Documents

Last Three Years’ Business and Personal Tax Returns

Tax returns tell the lenders your ability to pay back the amount of credit. They also want your tax returns because they want to know if you can pay back the loan.

Current Year Balance Sheet and P&L Statement

Balance Sheet and P&L statement are a part of the business plan. They also tell the lenders the creditworthiness of the and financial position of the business over the last few years. Accounts receivable and accounts payable should be included on the balance sheet. As with bank statements, if there is something negative in these documents, be prepared to discuss that with the lender.


If the lender requires collateral, take stock of the business assets, and identify their value. If you are willing to pledge personal assets as well, you should document their value as well.

Future Business Plan

Including a good business plan with your small business loan application shows the lender that you are not there for short-term gains but long-term benefits. What to include in a business plan includes its own checklist. It should definitely contain your target market, competition, executive team, and business model. You should also provide the financial projections for a minimum of 3-5 years.