New Delhi. Most of the people who apply for business loan complain that they do not get the full benefit of the government scheme. Most people's loan applications get canceled. If you are applying for loan through banks to avail the benefits of government schemes, then important things should be kept in mind. If you apply for a loan under the Government Scheme for Micro, Small and Medium Enterprises (MSME), then study, let us know due to which mistakes the loans are rejected?
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Incomplete Project Report (DPR)
To avail business loan under any Government Scheme, clarity in the Detailed Project Report (DPR) is very important. This is a document that contains complete information about your business, future earnings estimates and financial plan. Market research in this, where to buy goods from? Who to sell to? Information like how much is required to start a business, how much is spent on machines and raw materials, how much work force is required, estimate of turnover and loan repayment plan are required to be given? If your DPR is incomplete or not clear then your loan may be rejected in bank analysis.
CIBIL score and being a defaulter
Loan can also be rejected due to low CIBIL score and being declared a defaulter by banks or financial institutions. To avail the benefits of any government scheme, your CIBIL score must be at least 750+. With this, the bank decides whether you make the repayment on time or not.
Whereas defaulter means that you have not paid your loan installments for more than 90 consecutive days and the bank has considered your account as Non-Performing Asset (NPA). If you are not repaying the loan despite having money, the bank declares you a 'willful defaulter'. In both the conditions the bank can reject your loan.
misuse of subsidy
Some people misuse the subsidies received under government schemes. For example, quotations of machines are made fake or very expensive and machines are shown to be much more expensive than the market rate, apart from this, reluctance to give their own capital (margin money) like in every government loan the applicant has to invest 5% to 10% of the total cost of his own money.
If you tell the bank that you do not have any capital and want to adjust all the money through loans and subsidies, then the bank understands that there is no personal risk in your business, so you will not put efforts for profit and repayment, hence the loan may be rejected.
Ways to avoid loan rejection
Make a better DPR, write the information clearly, do not hide anything.
Maintain CIBIL score, make a habit of timely repayment.
Show correct quotations of machines related to manufacturing sector.
Keep margin money ready and clarify your financial conditions before taking the loan.
Do not show wrong name, address, land information in the documents.