Business

Eligibility Criteria For Business Loans In India – What You Must Know

Salient Points to Note – Business Loans in India

When you opt for a business loan, it can be for a multitude of reasons, including payment of salaries, office rent, office supplies and so on – till your business is able to acquire adequate investment, or can break even. Owing to the boom in the number of business ventures in the country today, both banking and non-banking institutions in the country offer business loans – backed by lucrative rates of interest and flexible tenures. However, most lenders will first require you to provide them with a clear plan of action for the funds requested and will wish to gauge your repayment capacity before they sanction such a loan. Over the course of this article, we shall look into business loan eligibility criteria in India. 

Business Loans in India – Types

If you wish to opt for a working capital loan in India, you can choose between the following two categories:

  • Secured Loans: A secured loan is one that is backed by a collateral – either machinery, plant, or any asset associated with your business. If for some reason you fail to repay your loan, the lender has the right to claim ownership of your collateral. They can then proceed to sell this collateral, to recover the bad debt that you have just created. 
  • Unsecured Loans: In the case of an unsecured loan, a lender will grant you a loan without asking for a collateral – making it much riskier for them if you fail to repay the loan. Thus, these kinds of loans are dependent on your business’ credit history, as well as other factors such as your business’ plan of action and capital requirement structure. Also, you can know about the types of working capital loans from the linked article. 

Business Loan Eligibility Criteria in India

Before you opt for a working capital loan in India, keep the following business loan eligibility criteria in mind:

  • Nationality: To apply for a working capital loan in India, you must necessarily be an Indian citizen, and must not have a criminal record.
  • Age: You must be at least 18 years of age, to apply for a working capital loan in India.
  • Credit Score: All lenders will gauge your ability to repay the loan based on your credit score. A credit score of 700 and above is considered ideal.
  • Eligibility for Application: If you wish to avail of a working capital loan in India, your business must necessarily have been incorporated as a public/private limited company, or a limited liability partnership, or a sole proprietorship, or a partnership. Additionally, individuals, MSMEs, SMEs, manufacturers, traders, and retailers are also eligible for a working capital loan, if they are engaged in manufacturing, trading, or services.

Documentation Required 

To avail of a working capital loan in India, you must have the following documentation in place:

  • Passport size photographs
  • Application form, duly filled out
  • A detailed business plan
  • Business Incorporation Certificates and requisite documentation
  • Income Tax Returns of the last 12 months
  • Bank Statements of the last 12 months
  • AADHAR card, PAN card, Passport, Utility Bills

Conclusion

 Now that you have understood the business loan eligibility criteria in India, you must make sure that before applying for the same, you carefully study the terms and conditions set by the lender you choose to approach. In addition to the above, every lender will also decide whether or not to sanction the loan by checking the age and nature of your business, your business’ revenue and profit statements, your marketing strategy, as well as your goodwill and repayment ability.

 

 

  

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