Check Eligibility For Short-Term Business Loan

Find out if you are eligible for a short-term business loan with our easy and quick eligibility check. Get started now and take your business to the next level!

13 Feb,2023 10:47 IST 2696 Views
Check Eligibility For Short-Term Business Loan

Short-term business loans are taken by business entities to raise necessary funds from banks or non-banking finance companies instead of borrowing from friends and family. These loans are obtained to support a temporary business capital requirement.

Short-term business loans are for a short duration that usually ranges between a few weeks to up to a year. If required, the term of the loan can be extended by a couple of years, depending on the lender.

During the loan period, the principal amount along with the interest must be paid back to the lender. The interest rates depend on the type of loan and the lender and other factors, but are generally higher than those on long-term business loans because of their shorter duration.

Types Of Short-Term Loans

Short-term loans come in various forms like a line of credit in which a credit limit is set and the business borrows the money as needed. Another type of short-term loan is invoice financing, which allows businesses to use account receivables invoices and get a loan from an invoicing company against the unpaid invoices.

Payday loans are emergency short-term loans that usually are for two to four weeks from the day of borrowing. The principal and the interest amount together are paid in a lump sum on the due date. In merchant cash advance, the lender provides a cash advance to businesses in exchange for the borrower’s credit facility.

How To Apply For Short-Term Business Loans

The application procedure of short-term loans varies depending on the lender. However, the loan application can be done both offline by filling a physical copy of the application form or online by visiting the lender’s website.

After the application form has been submitted along with the supportive documents as asked by the lender, the next step is to wait for the lender to contact and complete other formalities.

Eligibility For Short-Term Loans

Before applying for business loans of any type it is good to check the eligibility. This is because the eligibility criteria vary from bank to bank though to some extent it depends on the applicant’s profile, nature of business, and business needs.

Mostly, short-term business loans in India are unsecured. Due to a lack of collateral as available with long-term loans, most banks and NBFC have strict eligibility criteria that borrowers are required to meet to get the loans.

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One of the important criteria for getting a loan is to have a bank account. Not having a bank account makes it difficult to qualify for a loan. Lenders may ask for the applicant's bank history to verify income and have an idea of whether the applicant can pay off the monthly installments after managing other business expenses.

Without verifying the cash flow in a business, lenders find it difficult to assess the risk of lending. Opening a bank account could make it easier to qualify for a loan. Also, it makes the disbursal process smoother as most loan providers credit the loan amount directly to the borrower's bank account.

Listed below are some general conditions to be qualified for a short-term business loan:

• Borrower must be a resident of India
• A self-employed individual having minimum years of business experience can also apply
• Should be minimum of 18 years
• Should have proof of business turnover and tax returns of two-three financial years
• Must have balance sheet of the business to show revenue and cash flows
• Should have a decent credit score

Checking the eligibility criteria also helps to have an idea of the loan amount one can avail. The loan amount depends on business turnover, income tax return certificate, operational years of business, etc. Loan originators use income information to determine the applicant's ability to repay a loan and to determine the loan amount. Additionally, it helps loan providers to assess if the income is stable or not.

Most banks prefer lending to businesses that have a minimum number of operational years in the market. It varies from bank to bank but usually is between six months to three years. To know the chances of a business loan it is good to consult the bank, else look for alternative funding options.


All lenders want from borrowers is an assurance to repay the loans. Lenders consider several parameters like the applicant's profile, business stability, income level, financial history, repayment history and credit score while sanctioning a loan. Without clearing the set criteria borrowers may find it difficult to qualify for a loan. Hence, it is advisable to check the eligibility criteria to avoid facing disappointment.

Like most banks and NBFCs, IIFL Finance has a loan eligibility calculator to know where you stand. To know the eligibility, you need to log into IIFL Finance website and click on the loan type you wish to take. Next fill in the details as asked to find out the amount of loan you are eligible for. IIFL Finance provides unsecured business loans of up to Rs 30 lakh for as long as five years to help entrepreneurs and SMEs sustain and expand their operations.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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