The demand for chartered accountants in almost every enterprise has increased with the changing economic landscape. However, a nation of 130 billion people has only 2.60 Lakh chartered accountants (as of 2017). Unsurprisingly, the opportunities for these professionals are also numerous. While some prefer a job, others choose to have their own practice.
Now, it becomes quite challenging for the latter to grab all opportunities and expand their practice, the primary hurdle being capital. This is where most people avail external financing like a business loan for chartered accountants.
Designed specifically for the CAs, these business loans are usually unsecured and can be utilised for diverse purposes such as –
- Opening a new office
- Introducing new technology
- Paying the recruits
- Using as working capital
- Going for business trips, etc.
Although a CA has an excellent grasp of various financial terminologies and procedures, it is still vital to tick off the checklist before applying for a CA loan.
Here’s the to-do list:
- Have a clear purpose to the loan
A business loan for chartered accountants does come with no end-use restrictions, but one should have a clear objective to avail the funds. It helps not only to apply for the exact amount needed but also to utilize it strategically. Most NBFCs sanction a high amount of loan up to Rs. 35 Lakh.
It’s always beneficial to have a comprehensive business plan, showing risks and opportunities with statistics, case studies, etc. It can also include future plans, balance sheet, total income, etc.
- Have an acceptable CIBIL score
Lending companies consider an applicant’s financial habits, his/her way of handling previous and existing debts, etc. before sanctioning the business loan for chartered accountants. Hence, not only a clear credit history, but a minimum CIBIL score of 750 is just as essential. An applicant can get a credit report to assess his/her current CIBIL score and avoid chances of rejection.
- Assess additional charges
A business loan for CA comes with other additional charges including interest rates, processing fees, etc. A borrower should compare different lenders and settle with the one which offers comparatively low CA Loan interest rate and nominal processing fees. One should also enquire about pre-payment and foreclosure charges, etc. In short, learn about the charges on a CA Loan precisely. Opt for lending institutions which are transparent with their processing fees.
- Know about your eligibility
Just being a chartered accountant is often not enough to avail a loan. Although minimum, but reliable financial institutions require their borrowers to have the following –
- Ownership of a house or office.
- Possession of a COP or Certificate of Practice that is active for at least 4 years.
- Evaluate your repayment capability
One of the foremost things to assess before applying for a business loan for chartered accountants is repayment capability. As a borrower, consider your monthly income and ensure to have a FOIR less than 50%. Note that your loan EMIs may consume around 40% of your income. So, evaluate the EMIs, consider convenient repayment tenure and then apply for the loan.
Approach the lending institution which offers quick disbursal, especially if you are in immediate need of finance. Additionally, get answers to all your CA Loan queries before filling up the application. Ticking the items off this checklist can not only eradicate chances of loan application rejection but also fasten the approval procedure. So, take your practice to newer heights with a business loan for CAs.