Here’s Everything That You Need To Know About Business Loan Eligibility

Business Loan

A business owner can avail both secured and unsecured business loan but it is important for him to meet business loan eligibility to be qualified for it. The eligibility for business loan differs from one lender to another. There are many loan lenders in India that offer loans to both new and existing businesses, just the business owner has to meet eligibility criteria.

Let’s take a look a take a look at the business loan eligibility:

  • Business Turnover: the business turnover must be more than INR 10,00,000 to be eligible for a small business loan.
  • ITR: the ITR filed in the previous financial year should be more than INR 2,50,000.
  • Business Place: the business owner should either own a house or business premise. And the business place should be separate from the residence.
  • Vintage: the business should be in operations for more than at least 2 years.

Factors that affect Loan Eligibility

The factors that affect eligibility for business loan include:

  • The age of the business owner should be between 21 to 65 years.
  • Business turnover and income.
  • Co-applicants are not mandatory.

Factors that negatively affect Business Loan Eligibility

The main factors that affect business loan eligibility in a negative way include:

Credit Score: the credit score of every individual is calculated by the credit rating agencies, such as TransUnion CIBIL. A good and high credit score will not only increase the chances of getting the loan approved but also at a low-interest rate. Credit or CIBIL score is the most important eligibility criterion that is taken into consideration by every lender.

Criminal Background: if the applicant has a criminal background, there are absolutely no chances of getting the loan approved. All lenders are only willing to offer loans to the borrowers who are well capable of repaying the loan.

Business Stability: business stability is certainly the most important aspect to consider. If the business is not stable, does not have a steady income, and has a marginal profit, how will it repay the loan? Weak profit affects the business profile negatively, thus it is crucial to apply for a business loan in India only if you meet the eligibility criteria of the lender.

How to improve Business Loan Eligibility?

The following are the ways by which you can improve loan eligibility:

  • Identify the reasons behind the reductions for credit score before applying for a loan. The reason can be late credit card payments or outstanding EMIs. Applying for multiple loans can also affect loan eligibility negatively. All these factors result in bad and low credit score. Therefore, it is crucial that you maintain the minimum CIBIL score for a business loan and also keep a track of it.
  • Past payment history cannot be altered. But for the present and future, do not default on the transactions. It is important that you make all payments timely and always maintain adequate balance in the bank account for the EMI payments.
  • Repeated rejections of credit cards and loans will lead to a drop in CIBIL score by the rating agencies. If one lender rejects the application, it is recommended to apply for a loan only after at least 3 months.

You are suggested to look for a lender that offers quick loan services with low-interest rates. The best lender will be flexible in its term and conditions and eligibility criteria. The eligibility criteria should not be very stringent and also the lender should not ask for a long list of documents.

If you are planning to avail a business loan in the future, it is important that you keep an eye on your credit score as it is considered by all loan lenders. Additionally, you can also use the business loan eligibility calculator offered by online lenders to check your eligibility in just 10 seconds.

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