Can you think of any business that might have developed without any financial aid? We do not think. It is because business funding is essential for every organisation. Whether you’re a start-up or planning to expand your business with new resources/infrastructure, your business needs proper funding. There are several means of raising much-needed business funding:
- Bank Loans
- NBFC loans
- Angel Investors & Venture Capitalists
However, what’s the primary mode of acquiring those funds? Business loans from banks and other alternative lending institutions. You can apply for business loans with government or private banks or NBFCs such as ZipLoan. But, before you apply, you need to understand the loan eligibility criteria of each lender. This is because every lender has its own set of eligibility for a small business loan. However, there are some basic set of requirements that you need to meet.
Basic Loan Eligibility Criteria in India
- Age Limit: The minimum age of the applicant should be 21 years and maximum of 65 years.
- Income: At least for the past two years, the business should be in the profit-making scenario.
- Turnover: The minimum annual income of the company should be Rs. 10 lakhs
- Co-applicants: An optional clause for the applicant. It is not mandatory in case of business loan.
Basic Eligibility Criteria for Business Loan
- The organisation must be an established business that has been running for more than six months.
- The business should have a minimum turnover of Rs. 10 lakhs or more in the past year.
- The type of business should be classified under the blacklisted/excluded list of SBA finance.
- The physical location of the organisation should not be in the negative location list.
- The business applying for SME loan should not be a trust, NGO, or charitable trust.
Basic NBFC Loan Eligibility Criteria
- The sale of the previous year should be more than Rs.10 lakh.
- ITR of more than Rs.1.5 lakh during the last year.
- Either the borrower should own a business premise or house
- The business should be at least two years old (business vintage of more than two years)
- Business place and home must be different.
Now that we know the basic eligibility for small business loans, the next step is to examine how we can apply for business loans. One can apply for SME business loans in two ways – online or offline.
When you’re applying for a business loan offline, follow these five steps, and you can get a step closer to getting your funding.
Decide Why You Need Business Loan
This is the first question that lenders will ask you. You need to be able to justify your need for SME business loan. Most likely, your answer will fall under the following categories:
- Purchase inventory/raw material
- Purchase machinery/equipment
- Expand/enhance infrastructure
- Hire staff/to grow a team
- Marketing and advertising expenses
- Pay other business expenses
Calculate the Affordable Limit of Credit
When you’re applying for a business loan, you need to have a thorough analysis of the purpose of your loan. This is because that will help you determine the amount that you need to raise. Hence, you can apply for credit that you can quickly payback. Taking too much will bring you under a pile of debt, whereas taking less will prevent you from catching opportunities.
Determine which Business Loan is right for you
Unlike the older times, when there was only a local bank available for providing SME business loans. Today, the finance market is flooding with options to choose from. However, from this ocean of credit, you need to figure out which type of loan suits your requirements. The different types of loans you can choose from are:
- Bank Loans
- Medium-term Loans
- Short-term loans
- Business Line of Credit
- Invoice Financing
- Machinery Loan
Once you’re able to decide on the kind of loan you need, you can determine from where you want to get your business loan – Bank, NBFCs, Non-profit Micro-lenders, or online lenders.
Find out your Eligibility for a Business Loan
Once you are aware of the amount you need and the lender you want to choose, the next step is to examine the eligibility criteria of that particular lender carefully. You need to make sure that you meet all the requirements if you want your loan application to be accepted by the lender.
Gather your Documents & Apply
After you have reviewed all your options and eligibility criteria for a business loan to apply for SME loan, you need to gather a set of documents required by lenders. Much like the eligibility criteria, the necessary documents are subjective to the lenders. The basic documents required are:
- Business and personal tax returns
- Business and personal bank statements
- Business financial statements
- Business Legal Documents (e.g., Articles of incorporation, commercial lease, financial agreement)
In case you’re applying for a business loan online, within three simple steps, you can get your SME business loan. These three steps are:
- Apply Online: Log on to the website of the desired lender. Duly fill the small business loan application and submit. Their representatives will review your SME loan application within a few hours.
- Submit Required Documents: After you have applied for the small business loan online, you’ll be asked to submit a PDF file of all the required documents that are needed by the lender.
- Get Easy Small Business Loan: After reviewing your application and going through your papers, the lender will check your eligibility criteria as per their process. As soon as you are declared eligible, your loan request will be approved.
Therefore, getting a business loan nowadays is simple. And within a few steps, along with the right documentation, you can quickly get the financial aid your business needs to thrive in the industry.