Do I need a business plan to apply for a loan?

A comprehensive business plan is not always required to apply for a business loan; however, having one can significantly improve your chances of loan approval. Here's an overview of when a business plan is recommended:

• Startups: A business plan is highly recommended for new businesses or startups seeking their first business loan. Financial institutions want to understand your business model, financial projections, target market, and growth strategies before lending money.
• Large Loans: If you are seeking a sizable business loan (for example, over ₹10 lakhs), loan providers will likely require a business plan to make a lending decision. The business plan provides details on how you will use the loan proceeds.
• Business Expansions: A business plan helps demonstrate feasibility when applying for a business loan to expand your operations by adding a new product line, location, or other major changes.
• Poor Credit History: Applicants with poor personal or business credit history are often required to submit a business plan to prove their ability to repay loans.

While a detailed business plan is not mandatory for small business loans, you should prepare a loan proposal that covers key details like your business financials, loan amount required, purpose, repayment plans, and collateral offered. Providing well-organised documentation and financial details can help demonstrate you are loan-ready.