Business owners wanting to avail a loan need to meet the business loan eligibility to get their loan applications approved. Every lender has set some parameters upon which it judges if the borrower is eligible for a loan for a business. The prime motive for this is to check if the business owner will be able to repay the loan on time or not. Also, to determine if there is any risk involved.
Factors Negatively Affecting Business Loan Eligibility
There are many critical factors that affect loan eligibility negatively directly or indirectly. The following are the crucial ones:
CIBIL Rating: The creditworthiness of each borrower is evaluated by every lender. This is done to know the past financial habits of the borrowers, such as default payments, outstanding loans, and fraudulent activities. All these activities negatively affect loan eligibility.
Criminal Background: If the business owner has some criminal background or if he has some case filed against him, his loan is most likely to get rejected. The probability of him getting his loan application approved is very low.
Business Stability: Business stability is an imperative consideration. If the business is not generating enough revenues or is unstable, how will it repay the availed loan? Business instability is a big negative factor that leads to loan application getting rejected.
How to Improve Loan Eligibility for Business Loan?
No lender ever wants to risk his money. Therefore, he checks the business loan eligibility of every borrower in order to ensure that they will be able to repay the loan and there is no risk involved. There are several ways by which you increase your business loan eligibility and thereby, chances of getting the loan approved:
CIBIL or credit score is taken into consideration by every lender. It is the numeric representation of the creditworthiness. It ranges between 300 and 900. The minimum CIBIL score for a business loan is 650. If your score is below this, work towards improving CIBIL Score. You can check your eligibility on the business loan eligibility calculator.
Identify the reasons why your CIBIL score is low. It can be because of late credit card payments or maybe due to overuse of credit cards. Outstanding loans can also be one reason for the bad credit score. Identify all these reasons and work towards improving it.
Check for wrong entries in your CIBIL report. They can also have a negative impact on your score. Identify them, if there are any, and get them rectified immediately.
Past cannot be altered. For all the credit mistakes you have committed in the past, you cannot do anything. However, you can ensure that you do not repeat them in the present and future.
If you have any business loan requirements, you need to first check your business loan eligibility. And if you meet the eligibility for a business loan, you can further fill the loan application and avail the credit facility for the benefit of your business.
Additionally, you can also register your business for free at the Connect App by ZipLoan to build your business network. Through the e-marketplace, you can create a business profile, list your products/services, find business, discover new business opportunities, and build connections.