Business loan eligibility criteria are the first thing that a borrower searches for while looking for a business loan. If the borrower meets the business loan eligibility, then only gets the business loan approved. In this blog, we shall discuss the eligibility criteria for small business loan and business loan documents.

Leaving the confines of the job and starting own business is one of the best feelings in the world. To ensure that the business expands in the right direction, a businessman does everything, from traveling to great distances to working for an extended time. A businessman also spends all his savings to make sure that the business never runs out of funds.

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However, there comes a time when additional funds are required, for when a businessman sees an expansion opportunity or when the payment is delayed from the supplier. This is when a business loan seems the right option to him and he looks forward to availing it.

And when he looks forward to availing a business loan, business loan eligibility is the first thing that comes to his mind, followed by the documents required for a business loan. The business loan eligibility criteria are the requirements that the loan lender has laid in order to approve the business loan and must be fulfilled by the borrower.

Criteria for Business Loan in India

Business Loan

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This eligibility criteria for business loan differs from one lender to another. Let us here talk about some common MSME loan eligibility criteria that most of the lenders lay:

  • The MSMEs should be in operation for at least 2 years at a stretch. Not many lenders wish to offer business loan to new businesses since their ability to repay the loan is uncertain. The lenders need to see the last year’s ITR and balance sheet to ensure that you would be able to repay the business loan.

  • The business should have enjoyed turnover of a minimum of INR 10 lakhs in the last year. This is important business loan eligibility criteria. This, as said earlier, signifies that you would be able to repay the business loan on time.

  • Your residence should not be used as the business premise. In other words, your residence and business premise should be separate. This also is an important eligibility for business loan.

  • You should own either the business premise or house.

  • Your Income Tax Return Filing (ITR) for the previous year should be more than INR 2.5 lakhs.

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There are various means for business loan eligibility check in 30 seconds, one such is business loan eligibility calculator. You can check your business loan eligibility online with ease and lesser time.

Documents required for New Business Loan

Documents required for Business Loan

Also Read: How To Get A Business Loan?

Business loan documents also play a vital part in NBFC business loan eligibility criteria. Again, the required documents differ from one lender to another, below are the ones which are required by most of the lender:

  • Proof of identity, such as Passport, Voter ID Card, Driving Licence, Aadhaar Card, or any other proof issued by the government of India.

  • Residence proof, such as Electricity Bill, Landline Bill, etc.

  • Bank Statement: A strong bank statement that implies your creditworthiness and increases your chances of getting the business loan approved.

  • Information regarding balance sheet, Profit and Loss Account, and ITR (Income Tax Return).

  • Two passport sized photographs must be submitted along with the business loan application form.

Additional Business Loan Eligibility Criteria

Apart from the eligibility criteria and business loan documents, there are some other requirements as well that must be fulfilled. The following are the other requirements:

  • CIBIL Score: The CIBIL Score is the numerical representation of your creditworthiness. Most lenders usually offer a business loan to borrowers who have high CIBIL Score as they want to be sure of getting their money back. If your credit score is less than the minimum CIBIL Score for business loan, you must first look forward to improve CIBIL Score and they apply for business loan.

  • Registration Certificate: The certificate of the formation of the corporation or company. This certificate can also be called as the license by which a businessman carries out the business.

  • Project Report: A project report with the reason why you are carrying your business and the financial support you have is also sometimes asked by the lenders. If you really want to get the business loan, then you must submit an in-depth report with the project analysis.

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What are the Factors that Negatively Affect Business Loan Eligibility?

There are many factors that negatively affect loan eligibility. Let’s take a look at those factors:

  • Credit Rating: Lenders evaluate the creditworthiness of each borrower before processing his/her loan application. A good credit rating will improve the chances of getting the application approved. However, fraudulent activities, default payments, and outstanding loans can impact the credit rating negatively.

  • Business Instability: Business stability is an important consideration for a loan for the business. If the income of the business is not stable, then the lender will not be a position to approve the loan as weak profit impact the business negatively. It is important for the business owner to have stable business and profits to be able to repay a loan.

  • Criminal Background: There is no probability of getting the loan application approved of there is any criminal record against the borrower. All lenders wish to lend their money only to the businessmen who are good in the eyes of law.

How to Improve Business Loan Eligibility?

The following are the ways to improve business loan eligibility:

  • The past repayment history of loans cannot be altered. But it is suggested to not default on future transactions. Ensure that you make all the payments on time and there is an adequate balance in the bank account.

  • It is important to identify the reasons why there are reductions in the credit score. The same can be because of late credit card payments or outstanding EMIs. Identification of the same and rectifying it is important.

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ZipLoan is an RBI registered NBFC that offers a business loan with minimal documentation and low-interest rates. Our business loan eligibility criteria are easy to meet and we approve and disburse loan fast.

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