Business loan eligibility is the most important factor that the businessman looks for while availing a loan for the business. Notably, the business loan eligibility is set by the lender upon which they determines if the borrower is eligible for a loan or not. It is an important criterion that the borrower must meet in order to get the loan sanctioned.

In simple language, the business loan eligibility is the certain factors which help in determining the financial stability of the businessman and business. They include the CIBIL score, bank statement, ITRs filed, and turnover and vintage of the business. Notably, every lender has different eligibility criteria and the borrower must see the specific eligibility list of the lender before applying for a loan with them.

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

Credit Score History

Business Loan eligibility

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The credit score history or CIBIL score is an important factor that affects the loan eligibility the most. It is primarily used to assess the eligibility of the borrower. If an entrepreneur has a good CIBIL score, the lender checks his application further. But in case it is below the required threshold, the loan application is rejected straightaway.

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Additionally, the business loan interest rates are lower for borrowers with low CIBIL score since the risk is also low. So, check your CIBIL score and if it is below the mark, work towards improving it.

Performance of Business

business loan eligibility

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The performance of the business helps in evaluating the income of the business. It is an important factor as a business with not so good revenue will not be able to repay the business loan. So, the financial performance and overall performance of the business also plays an important role in business loan eligibility.

For this, the lenders evaluate the ITRs filed and the bank statement of the business owner.


business loan eligibility

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In order to reduce the risk of the business loan, most lenders (especially banks) require collateral. They offer collateral loans and require the borrower to hypothecate an asset to avail the loan for the business. So, the availability of the collateral also plays an important role. The collateral documents are required for a business loan.

Noteworthy, the small business owner who cannot avail a collateral loan can avail a collateral-free business loan mostly offered by NBFCs in India.

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Business Vintage

business loan eligibility

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Business vintage is also an important factor for business loan eligibility. Generally, a business with more than 2 years of age is granted loans. Business in operation for quite some time can offer the ITR, bank statement, and show other proofs of its financial performance and stability. So, a start-up is generally not granted unsecured business loans.

While reviewing the loan application, most lending institutions consider business vintage. So, the businessman must apply for a loan for business if the business is in operations for at least two years.

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Now that you know the factors that affect the business loan eligibility the most, you can keep a tight watch on them. And ensure that they are not having a negative effect on your eligibility for a loan.

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