When it comes to kickstarting a business (small, medium or large), the very first thing that comes to your mind is arranging the capital needed to do so. There are many people who usually have their businesses backed by powerful investors and savings, but what about those who do not really have any such means? Here is where an MSME loan swoops in and saves the day for most small and medium-sized business owners.

Whether it is for buying new inventory or stocking up for the busiest sale season of the year, applying for a digital MSME loan can prove to be a lifeline for your business. These loans can significantly fuel your business only if you avoid these common mistakes, due to which many applicants end up facing multiple rounds of rejection. These mistakes are pretty standard, but avoidable at the same time.

1. Applying Without Checking Eligibility Criteria: 

Every financial institution that offers an MSME loan has different eligibility criteria that all applicants need to qualify for. This is just to move on to the next round of the loan approval process. Applying to any loan without actually checking if you meet the eligibility criteria can lead to unnecessary rejections. Hence, before clicking that ‘Apply’ button, always make sure that you review the criteria requirements carefully. 

2. Ignoring Credit Score And Credit History: 

The first thing that a lender typically analyses of an applicant is their credit score and history. They very specifically mention it in their eligibility criteria that they would only screen applicants who have a credit score above the desired number. Hence, always keep an update on your credit score before actually applying for an MSME loan online. 

3. Submitting Incorrect Or Incomplete Documentation: 

Lenders need proper and legitimate documentation from the applicant’s side in order to evaluate their creditworthiness. Failing to upload the required documents or uploading the incorrect ones will always result in rejection of your application. This is why you should be doubly careful while uploading any document to support your loan application. 

4. Overlooking Business Plan And Projections: 

When applying for a digital MSME loan, the lender always ensures that they check the business proposal and projections submitted by the applicant. This analyses how the borrower would use the loan amount and how they plan to repay the same. Hence, always prepare a solid and strong proposal to back up your loan application. 

Before applying to any bank for an MSME loan, always make sure that you check the rate of interest at which you would be eligible for a loan using their own MSME loan calculator. This would give you a rough estimate of the actual amount that will come into your pocket and the rate of interest after the loan is approved. It would majorly help you figure out your repayment plan efficiently, and also do a thorough comparison of multiple lenders using the same method. 

Furthermore, if you feel like you would not get an MSME loan without putting up significant collateral, then you can always apply for an MSME Mudra loan. A Mudra loan is essentially a government-backed initiative to support micro and small-scale business entrepreneurs to access capital, but with relaxed eligibility criteria. 

If you are an entrepreneur who does not know where to apply for an MSME loan, then you should simply search ‘apply for MSME loan’ on the internet, and there will be multiple options to apply to. Just make sure that you verify the website before proceeding with entering your private details. A pro tip you can use to verify the website is to ensure that it belongs to a legitimate bank, financial institution or NBFC.