In order to avail a loan, it is important to meet the business loan eligibility set by the lender. The businessman can look forward to avail a business loan without security or with security as per his needs. There are many loan lenders in India that offer business loans. But every lender has eligibility criteria that the business owner must meet to get the loan approved.
Although every lender has different business eligibility criteria, there are a few points that is common for all of them. The business owner must meet them to be eligible to get the loan approved. So, if the business owner’s eligibility is low, he can work to improve his eligibility to loan approved. However, before talking about the ways to improve business loan eligibility, let’s first understand the factors that affect eligibility for business loan negatively.
What are the Factors that Affect Business Loan Eligibility?
There are numerous factors that affect loan eligibility, directly and indirectly, some of which are critical. Knowing these factors will help in improving eligibility and ensuring that the business owner is eligible for the business loan. The following are the same factors:
Every loan lender in India considers business stability as important loan eligibility. If the business is not stable and does not generate stable profit every month, how will it repay the loan? Weak profit depicts the business owner will not be able to repay the loan. Thus, the loan application will be rejected.
The creditworthiness of the borrower is evaluated by the lender before approving the loan application. A good credit rating will increase the chances of getting the loan application approved. Factors that affect the credit rating negatively include default payments, fraudulent activities, and a number of outstanding loans.
Also, if one lender rejects the application on the basis of the credit rating, there are fewer chances of other lenders approving the application.
If the business owner ever had a criminal background or if there were any suspect case filed against him, there are very high chances of the loan application getting rejected. All the lenders are only not only willing to offer loans to the business owner who is capable of repaying the principal along with interest but also to the borrowers who are good in the eyes of the law.
How to improve Loan Eligibility?
Now that you know the factors that impact the loan eligibility, let us understand how to improve eligibility:
It is important to identify the factors that are reducing credit rating. The factors can be late payment of outstanding bills, late credit card payment, or EMI defaults. It is essential that the business owner keeps an eye on these factors in order to maintain a good track record.
The past late payments must have impacted negatively on the score but the past cannot be altered. The businessman has to ensure to pay all payments on time and keep adequate balance in a bank.
Repeated loan application rejection and outstanding loans will lead to a drop in credit rating. If one lender has rejected the application, there are chances that others will also reject the loan application.
Always opt for a lender who has basic loan eligibility and minimal documentation requirement. This will help in getting the loan application approved more easily.
So, if you are planning to avail a business loan, then it is important to keep an eye on all the transactions. Maintaining credit score and managing all other factors will help in improving business loan eligibility.