Business loan can come to the aide of business owners, self-employed professionals and entrepreneurs who want additional funds for day to day operation or business expansion purposes. However, there are certain business loan eligibility criteria that applicants must meet for the successful loan application.
Business Loan Eligibility Criteria
Following are the Business loan eligibility criteria that most banks require their applicants to meet before loan sanctioning.
| Type of Applicants | Proprietors, Private Limited Company, Self-employed individuals and professional and Partnership Firms |
| Applicant Age | Between 21 and 65 Years of Age |
| Minimum Business Functioning Time Period | 2 Years |
| Minimum Business Experience | 2 Years |
| Minimum Business Turnover | Rs. 12 Lakh |
| Minimum Profitable Time Period | 2 Years |
| Minimal Annual Income as per ITR | NA |
Note: The following criteria are for indicative purposes only. Actual eligibility criteria can vary from bank to bank
Calculate Your Monthly EMI on – Business Loan EMI Calculator
How to Improve Business Loan Eligibility
If a client’s business loan application is rejected then they can improve their eligibility through the following ways:
Error-free Documentation
One of the reasons a client’s business loan application can be rejected is missing or fake documents. Applicants must ensure that they submit all the requisite documents at the time of application. Indeed, the bank will reject the application if KYC or any other documents are missing.
Business Profitability
Banks typically extend loans to businesses that are running profitably. So, if your business is running on loss then the bank will reject the application. In this scenario, it is best advised that the client seek a secured loan.
Regular Tax Payments
Defaults on tax payment can lead to loan rejections. Thus it is absolutely essential that customers pay their taxes on time
Future Financial Security
Banks extend loans to those clients who seem able to repay the amount. For example, if a customer seeks a business loan to renovate a rented shop. The bank will require that the lease of the shop expire at least 3 years after the end of repayment date. Also, if the industry for which the loan is applied for is too volatile then the bank might reject the loan application or give it at a high interest rate.
How to Apply for Business Loan
Prospective clients can apply for a business loan through the following ways:
Online Application
Customers who seek a business loan can apply for one through Paisabazaar.com. Simply follow the steps written below:
- Visit paisabazaar.com and go to its business loan application page
- Mention the requisite details
- Fill out the comprehensive form and click on View Best Offers
- Suitable business loans deals will be displayed
- Select the business loan of choice and fill out the details
- An agent will call and set a date and time to pick up the documents for verification.
- Once the documents are verified, the loan will be sanctioned
- Post-loan sanctioning, the loan amount will be credited to your bank account
The Bank or NBFC will scrutinize the documents and ensure the client meets the business loan eligibility criteria. Finally, the bank or NBFC will revert back to the customer with the verdict on loan approval.
Business Loan Eligibility Criteria – Documents Required
Document verification is done by banks to ensure that the customers are meeting the required business loan eligibility criteria defined by the respective bank. The following documents are required to verify business loan eligibility criteria.
- Permanent Account Number or PAN Card
- Bank statement for the previous 6 months
- Latest Income Tax Returns (ITR), income, balance sheet, and profit and loss account for last 2 Years (audited by a chartered accountant)
- Proof of continuation which includes; ITR, trade license, establishment, sales tax certificate
- Mandatory Documents: Sole Proprietor Declaration, Certified Copy of Partnership Deed, Certified true copy of Memorandum, and Articles of Association which must be certified by Director and original copy of Board resolution
Along with this certain Know Your Customer (KYC) documents are also required. These are mentioned below:
| Identity Proof | Aadhaar Card, Passport, Voter ID Card, PAN Card, Driving License |
| Address Proof | Aadhaar Card, Passport, Voter ID Card, Driving License |
Business Loan Eligibility – FAQs
Q. What is the preferred credit score for business loan eligibility?
The preferred CIBIL score that banks seek is 650 onwards. At the time of loan application, the bank will scrutinize the credit history of the applicant. If the credit score is lower than 650 then the bank might charge a higher rate of interest.
Q. Does background information affect the chances of loan approval?
Yes, background information can severely hamper the chances of loan approval. If the bank finds out there are convictions of fraud or other criminal records then they will reject your loan application.
Q. How can I apply for a Business loan?
To apply for a business loan you can simply visit paisabazaar.com to check and compare the best available deals in the financial market. Further, you just need to fill in the basic information and then your desired bank will get in touch with you for further formalities.
