Check Business Loan Eligibility Criteria In 30 Seconds

Whether you want to start your own business or whether you want to expand your existing business, the most common way to get some funding is to apply for a business loan . However, lenders have some criteria that every borrower needs to fulfill in order to increase chances of loan approval. These criteria are put in place by the lender so that they can be sure that the business in question is a viable one and the borrower can repay the loan amount.Every lender has a different set of criteria. Given below are the most common ones that major lenders require:- The MSME or Micro, Small or Medium Enterprise should have been operational for at least two years at a stretch. Getting a business loan for a new startup is extremely difficult because lenders cannot assure loan repayment. With an already established enterprise, however, lenders have an idea of how the company performed for 2 years.- The business in question should have had a turner of at least Rs. 10 lakhs in the previous year.- The business premise must not be the same as the business owner’s house. The business should be running from a separate location other than the owners house.- The business owner must own either the business premise or the house.- Your Income Tax Filing for the previous year must be more than Rs. 2.5 lakh

- Proof of identity and proof of residence- Bank statements of borrower for the past 6 months- Balance sheets, profit and loss statements and ITR filings of your company for the last 2 years- Ownership documents, trade license and proprietorship or partnership deed.

Credit Rating

Based on your previous loans and their repayment pattern, a credit rating is calculated that gives a general idea of your loan repayment ability. Lenders will look at this credit rating and your chances of getting a loan is higher if the credit rating is good. However, if you have defaulted on previous payments, chances are that your credit rating will be low, which will negatively affect your business loan eligibility .

Business Instability

Nobody would want to give out a loan for a company that doesn’t have the potential to grow. So, if profit margins are low and the business is unstable, chances of a business loan approval could be slim.

Criminal Background

The probability of getting a business loan is close to none for people with a criminal background. A clear criminal record is one of the eligibility criteria for loans.

A lot depends on your credit score so you can try to increase your credit score in order to improve loan eligibility. Identifying why your credit score is low is important. Start paying your credit card bills and your outstanding EMIs well before the due date and make sure your debt is minimum. All this will ensure that your credit score gets back on track and help improve your loan eligibility.

Thus, a lot of factors are considered by a lender before they approve your business loan . Now that you know the business loan eligibility for startup , prepare yourself with the necessary documents and data, read the lender’s eligibility criteria carefully and apply for the business loan.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.