How to improve chances of loan approval for self-employed individuals?

As a self-employed professional, here are some tips that may help you increase your chances of getting your loan approved:

• Have a good personal credit history. Loan providers typically want to see a credit score of at least 650 or higher. Pay bills on time and avoid having too much outstanding debt relative to income.
• Provide tax returns for the last 2-3 years. This helps demonstrate the business is profitable and stable over time. Financial institutions usually want to see consistent revenue and income.
• Show strong current business revenue and profits. Recent bank statements, profit/loss statements, and accounts receivable/payable can illustrate healthy business finances.
• If possible, make a large down payment. A 20% or higher down payment signals that you are financially committed.
• Use assets for collateral. Having business assets or personal assets to secure the loan provides assurance of repayment.
• Bring in a co-signer if you have one. A co-signer with good credit and finances can improve the chances.
• Apply with a loan provider you have a relationship with. Existing relationships with banks or NBFCs (Non-banking Financial Companies) can help.
• Be ready to explain any issues or inconsistencies. Having a plan to address problems like revenue declines improves chances.
• Consider SBA-backed loans. SBA-backed loans are partially guaranteed by the Small Business Administration in the U.S. and similarly in India, the government has implemented various initiatives and schemes, which encourages lenders to provide financing to self-employed individuals and small businesses. The SBA guarantee can make loan providers more comfortable with self-employed applicants.