Business loan eligibility criteria that most banks and NBFCs require their applicants to meet before loan sanctioning is further discussed. The eligibility criteria shall differ from lender to lender and usually depends on the applicant’s profile. These details can also be checked by accessing business loan eligibility calculator.
What are the Eligibility Criteria for Business Loan?
|Age Criteria||Min. 18 years and above|
|Eligible Entities||Individuals, SMEs, MSMEs, Sole Proprietorship, Partnership firms, public and private limited companies, limited liability partnerships, retailers, traders, manufacturers engaged in only services, trading and manufacturing sectors|
|Business Vintage||Min. 1 years and in profit|
|Business experience||Min. 1 years, business location to remain same|
|Annual Turnover||Min. Rs. 12 lakh and above for existing enterprises|
|Credit Score||650 or above|
|Nationality||Indian citizen, should not have defaulted on any previous loan(s)|
|Additional Criteria||Applicant must own either a residence, office, shop or go down|
Note: The following criteria are for indicative purposes only. Actual eligibility criteria can vary from bank to bank for business loan eligibility check
Documents Required to Apply for a Business Loan
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:
- Duly filled application form with Passport-sized Photographs
- KYC documents of applicants, partners, co-applicants: Passport, Aadhar card, Voter’s ID card, PAN card, Driving license, Utility Bills (Recent Water or Electricity Bills)
- Last 6 months’ Bank statement
- Business incorporation certificate
- Business Annual Turnover: Min. Rs. 10 lakh for existing businesses
- Any other document required by the lender
Purpose of availing Business Loan
Business loan can come to the aide of individuals, business owners, startups, self-employed professionals, entrepreneurs and MSMEs who want additional funds to meet working capital requirements, for business expansion purposes, to buy machinery/equipment, paying-off rent, salaried, debt or managing business cash flow. However, there are certain business loan eligibility criteria defined by the respective banks and NBFCs that applicants must qualify for the successful business loan application.
Also Know: How to calculate a business loan EMI
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How is Business Loan Eligibility Calculated?
Business Loan eligibility is calculated on basis of various factors as mentioned:
- Applicant’s Age
- Nature of Business
- Applicant’s financial history, source of income & CIBIL score
- Business turnover and vintage
- Applicant’s repayment capability & creditworthiness
- Business stability or profitability
- Loan defaults, if any
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How to Improve Eligibility for Business Loan?
If a client’s business loan application is rejected then they can improve their eligibility through the following ways:
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.
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.
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Q. How does your income affect your business loan eligibility?
Ans. Income of the applicant is vital to get a business loan, as it gives a sense of security and reliability to the lender that the borrower shall be able to repay the loan on time, without getting defaulted.
Q. What is the minimum annual turnover required to apply for a business loan?
Ans. The minimum annual turnover required to apply and qualify for a business loan varies from lender to lender. However, it is Rs. 12 lakh, if you apply for a loan via paisabazaar.com.
Q. What is the minimum interest rate offered by banks or NBFCs?
Ans. The business loan interest rate starts from 14.99% onwards and can exceed depending on the requirements.
Q. What is the loan amount offered under business loan?
Ans. The minimum loan amount offered under business loan is Rs. 30,000, however the maximum loan amount can go up to Rs. 1 crore which may also exceed as per the requirements.
Q. What is the preferred credit score for business loan eligibility?
Ans. The preferred credit score that banks seek is 650 onwards out of 900. 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?
Ans. 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.