Facing Bank Rejection in Kolkata? Explore Alternate Funding Options

Introduction

Starting up a small business has multiple risks involved in each stage, especially with the constant growth in the MSME landscape of India. There’s always a high chance for insolvency considering the low-profit margins and a very rapid growth of competition with highly innovative business models. Since the MSMEs of India contribute to 29% of the country’s GDP, there are various lenders who offer small business loans to help the company sustain and fulfil their required financial support despite challenges such as business loan rejection.

In tough situations, dealing with a business loan rejection in the state of Kolkata can feel like a major setback for enterprises in their growth stage who are aiming to expand or stabilize their operations. Tightening of credit approvals by banks can cause many startups and SMEs to struggle to meet the stringent criteria. In such situations, it becomes imperative for entrepreneurs to explore alternate funding options to sustain and grow their ventures.

Why Businesses in Kolkata Face Business Loan Rejections

The government has introduced a multitude of initiatives in order to give a boost to the MSME lending. Despite such efforts, various businesses in Kolkata face difficulties in securing loans from banks. There can be multiple layers as to why startups face such troubles, but some of the key reasons include having a low credit score, submitting inadequate documentation, having unrealistic plans for their business and risk-averse lending policies compounded by economic uncertainties.

Such factors can affect the loan rejection process for a startup enterprise and this is where it becomes essential to explore the option of alternate funding in Kolkata. Now that we’ve established the reasons for rejection of loans, it’s time to understand the same in a deeper and elaborate way and further know about NPA Finance in West Bengal that supports distressed businesses.

Understanding Business Loan Rejection: Common Reasons

1. Low Credit Score: A credit score is a three-digit score ranging from 300-900. After the submission of loan documents, the lender researches the founder’s, Director’s or company’s credit score. A score that’s below 650–700 can greatly diminish chances for approval.
2. Incomplete Documentation: Documentation is a very important part of the application process and unfortunately, is the most prominent reason for rejection of a loan. Mistakes in the process, such as missing financial, compliance, or KYC documents, can cause automatic rejection.
3. Unrealistic Business Plans: Presenting a business plan that’s far-fetched and makes the lenders feel that it’s a risk to invest in, so it can result in rapid business loan rejection. Banks look for a well-researched plan that demonstrates very clear revenue streams and strategies.
4. Early-stage or New Businesses: A business that is at an early stage with a very short history of cash flow and a lack of collateral might face rejection. There are however some lenders who invest in early-stage startups; hence in such cases, it is more important to research your options for loan application.
5. External Economic Factors: Setting the industry-specific reasons aside, there can be instances where certain external factors like wars, pandemics, geopolitical conditions, recession or even changes in policies can also cause rejection for loans.

Impact of Loan Rejection on Growth-Stage Enterprises

Loan rejections can affect your plans for the company by putting a halt to your business expansion plans and further getting rejected for a loan can also disrupt the enterprise’s cash flow while impairing its ability to access capital opportunities available in the market at that time. For many MSMEs and startups that are based in Kolkata, this can result in delayed payments to suppliers, missed contracts and hindrance in innovation, ultimately affecting the overall functioning of the company. In such situations, it becomes imperative to look for NPA finance in West Bengal in order to understand the process of alternate funding in Kolkata.

Alternate Funding Options in Kolkata You Should Know

When banks say no, alternate funding in Kolkata gains increased importance. Certain options a small growth-stage startup can avail itself to secure alternate funding are as follows:

• Accessing microloans: Microloans are provided mainly by government institutions or NGOs and help your company with essential requirements of initial funds to expand operations or purchase machinery. They also have a low interest rate and offer a little more flexibility than bank loans.
• Peer-to-Peer (P2P) Lending: In simpler terms, P2P platforms allow companies looking for loans to acquire the same without having to visit the bank. Online platforms like marketplace connect borrowers and investors directly, giving the lenders options of which company they want to provide a loan to.
• Venture Debt and Private Equity: PE firms generally invest in private and unlisted companies that display a scope for larger growth; these are very suitable for startups with a potential for growth.
• Crowdfunding: This concept allows your company to reach out to investors through the use of platforms like FundingCircle and Crowdcube, where they can pitch for investment and attain small amounts from various lenders, which ultimately totals up to the required amount.

NPA Finance Solutions in West Bengal: A Lifeline for Stressed Businesses

There are various businesses that are struggling with a prevalent issue of Non-Performing Assets (NPA), i.e. a loan where repayment is due for over 90 days. The reasons why companies might have NPAs could be due to defaults or stressed debt; in such times, reaching out to providers of NPA finance in West Bengal becomes essential. NPA help providers offer services like restructuring, refinancing, or fresh working capital to manage repayment pressures and bring the company to the revival stage, preventing further business loan rejections. To prevent your business from insolvency and maintain its continuity, contacting firms that offer NPA finance in West Bengal becomes imperative.

How to Prepare for Alternate Funding After Bank Refusal

• Improve Credit Profile: As mentioned before, maintaining a good credit score on a personal level as founders and on a company level is essential to gain alternative funding options. So it’s important to regularize dues and also maintain financial discipline.
• Organize Documentation: Read the requirements for documents very carefully, check and re-check them to ensure that you’re carrying all the necessary documents. Carry your company’s updated audit reports, information about tax filings and compliance certificates.
• Revise Business Plan: Provide the lenders a research-backed business plan that conveys your company’s potential growth, keep them realistic and present a clear strategy for repayment of the loans to the alternate lenders.
  Explore Multiple Sources: The market consists of various lenders, each with its own requirements, hence select wisely and reach out to NBFCs, fintech lenders or firms that offer alternative finance solutions.
• Leverage Government Schemes: With the MSME sector being a significant contributor to India’s GDP, the government has launched schemes like the Credit Guarantee Trust Fund for Micro and Small Enterprises, which can prove to be greatly helpful for a small business.

Conclusion

Business loan rejection in the state of Kolkata can feel like a looming challenge, but it most certainly does not signify the end of a business. By reaching out to corporations that offer NPA Finance in West Bengal and getting a grasp of alternate funding in Kolkata, companies looking to acquire a loan can proactively start preparing for the same. With the right approach, even enterprises facing struggles in regards to NPA finance in West Bengal can find an appropriate solution in order to continue their growth sustainably. This diversified funding strategy can help Kolkata’s entrepreneurs overcome hindrances related to credit and empower them to achieve their development ambitions.