Eligibility Criteria For Business Loans In India
Business loan is available to any individual who owns any kind of a business. But there are certain criteria which are considered by lender before providing a loan.
Businesses require capital to manage their day-to-day financial needs and to scale up. In fact, often taking a loan becomes critical for entrepreneurs.
But taking a business loan is not the same as a personal loan and lenders have a string of conditions that are used as a basic filter for approving a loan to a borrower.
These conditions span a number of checklist boxes starting with the operational vintage of the business enterprise, borrowing history of the business owner and co-owners as well as their age, revenues of the business for which the loan is being availed, profitability and related cash flow situation of the entity and more.
Who Can Take A Business Loan:
Business loans can be availed by various forms of business enterprises, be it a professional like a doctor or a chartered accountant running their own practice, a private company or even a partnership engaged in any sector: manufacturing, trading or services. But most lenders do not lend to charitable organisations, NGOs and trusts.Vintage:
One basic requirement that is checked by lenders is how long has the business been operational. The actual criterion differs by lenders with some lenders insisting on a minimum length of operations of two-three years while others tend to relax this condition and ask for at least six months of operations.Borrower’s Credit History:
Lenders do base a large part of their lending decision on the credit score of the business owner and co-owners, who are essentially the borrowers. As a result, the credit history with existing or past loans and repayments become important for getting an approval. Lenders do insist on a minimum credit score that ranges between 650 and 700 for sanctioning a business loan.Revenue And Profit:
The biggest concern of any lender is the repayment of the loan. Since this is dependent on the existing business, lenders do look at the turnover of the enterprise. But this varies from lender to lender. Some insist on a minimum turnover of just Rs 90,000 for the last three months while some require businesses to have revenue of Rs 40 lakh. At the same time, many lenders insist on the business making profits for the last two-three years.Age Of Borrower:
The age of the borrower, who is in effect the owner or co-owner, is part of the critical eligibility checkbox. Most lenders insist on the borrower being in the 21-65 years age group, though a few have a different lower age limit at 22 or even 25 years. At the same time, some lenders also have an upper limit with the age of the borrower not exceeding 72 years at the time of loan maturity or repayment deadline and closure.Conclusion
Availing a business loan is an important part of running and growing an enterprise. Lenders have certain basic eligibility criteria for sanctioning a loan. This covers aspects like age of the borrower as well as operational vintage of the enterprise, revenues, credit history of the owner as also the type of business enterprise.
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