Over a period of time as the business grow, we look forward to increasing the credit limit for a business loan in Tamil Nadu provided the business has the credit line facility from the banks. This comes in handy when access to external funds is demanded. Getting approval for the increase in credit limit is not an easy process. Here are some of the tips which when followed helps to increase the credit limit for a business loan.
Maintain a spotless repayment history
As the banks keep track of your repayment history, it is essential to maintain a spotless record which increases the chances of your credit limit getting increased. Your credit limit will be increased by the creditors automatically if you make payments on time.
Have an apt reason to request a credit limit increase
You should not request a credit limit increase just because your business has new opportunities on the way. You should have a valid reason before requesting a credit limit increase. If you have received more orders or if you have signed a new contract, show the proof of the same to the banks so that they can get a justifiable reason to increase the credit limit. In case if the bank finds the reason to be unjustifiable, there are chances that the bank may withdraw the credit line interest.
Often use the credit line irrespective of the need
According to this, even if you don’t have a need to use the credit line, use it. Such that the bank may approve your credit limit increase when the need arises. The bank will be reluctant to increase the credit limit if they find that you haven’t utilized the credit line for quite a long time. It is because, only if you utilize the credit line, the bank can earn any interest income out of it. Hence, it is advisable to use the credit line once every 3 months irrespective of the need.
Find the right time to ask
Your credit line will be reviewed automatically within one year of granting by the banks and finance companies in Chennai. It is essential to note that the review can be requested only at the end of one year and not within few months of issuing the credit line. Doing so may create a negative impact from the bank side as well as from the finance companies in Chennai.
Do not demand a higher increase
One of the thumb rules to remember before asking for an increase is to demand only a 10 % to 25 % increase in the credit limit. It is not a wise decision to raise a request to double the credit limit. There are chances that the bank may deny the request when your request is too high. You have to be practical before rising a request.
The financial account and other business records should be up to date
Having your financial report and business records up to date is considered a very strong point to increase the credit limit. Failure of which may lead to the delay of credit limit increase.
Pay attention to the double edge sword
Credit is considered a double edge sword. Though it looks like helping your business grow on one side, it may get you stuck when you couldn’t repay it later. Hence, it is essential to think twice before requesting a credit limit increase.