All those who are in need of business loan should meet the below eligibility criteria. It is known fact that all loans have certain types of eligibility criteria and it may vary slightly from bank to bank. For business loan the prerequisites are little high and too many levels of checks are done by the lender before approving a business loan. Here is the list of 10 prerequisites of business loan in India.
- Age Limit:
In order to be eligible for a business loan the applicant should be minimum 21 years & maximum 65 years. This is the most basic and first criteria the individual should cover in order to be eligible for a business loan. There will be absolutely no relaxation given to this criterion.
This is the concept of giving an asset as security for the loan purpose. Most of the banks require a collateral or security in order to approve a business loan. The collateral is usually an immovable property or an asset like land, house etc. A loan that is covered by collateral is called secured loan and the interest rate for such loans will be relatively lesser than unsecured loan. This is due to the fluctuations in the security factor.
- Business Plan:
Most of the banks or lenders need a business plan before approving a business loan. Even a lean business plan is sufficient to get a loan approved from reputed banks. This business plan includes the product, company, team, market and financials.
- Financial Details of the Business:
By this what is expected is the document of all bank loan accounts, credit card accounts, investment accounts, and debts incurred, past and current loans. And some of the supporting documents such as complete contact information, tax ID numbers, addresses.
- Account Receivable Complete Detail:
This information includes the transaction-by-transaction information of sales and also payment history. If there are no account receivables, the same should be clarified with the bank.
- Complete Details of Account Payable:
Just as the case with account receivables even the account payment. This information includes the transaction-by-transaction payables outstanding with creditors. If there are no account payables, the same should be cleared to the bank.
- Audited and Reviewed Financial Statements:
For this purpose it is good to report the balance sheet or profit and loss account of the company or yet to start company details. This is the ideal document that will suffice all the financial checks of the company.
- All Personal Financial Details:
Along with the business details and identity proof of the individual, the applicant should also share personal financial details. This information should be shared to the extent which the requirement of loan is. Bank basically needs to know if the applicant has sufficient income and financial stability to repay the loan completely.
- Insurance Information:
As all about this loan requirement is related to reduce the risk of the individual and also meeting the financial requirements. In case of new businesses most of the banker will ask for insurance of the applicant. This is to safe guard the loan amount in case of the death or illness of the applicant which will lead to non-repayment of the loan.
- Past Returns Copies:
Banks will require tax returns documents; this is to check the legitimacy of the company and what is the income furnished by the business in the court of law. It is crucial that every business should file taxes as early as possible without any defaults or delays.
Each applicant is eligible for a business loan if you are a salaried individual, self-employed engineer, doctor, chartered accountant, architect, or have a MBA with minimum 2 years’ experience in any reputed company.
- Loan Amount: Your personal loan limit would be determined by your income and repayment capacity. And other factors are age, location in India and credit rating of the individual and also the company.
- Minimum Income : 35,000/- is offered in metros and urban centers and 30,000/- in rural/semi-urban centers.
If you meet these eligibility criteria then the loan will be as per the below rate of interest and charges:
|Interest Rate||11.20% – 16.30%|
|Lowest EMI||₹ 2,090 per lakh|
|Tenure||1 Year to 4 Years|
|Loan Amount||Min ₹ 500,000 and Max ₹ 1,000,000,000|
|Part Prepayment Charges||Nil- 4% of outstanding amount|
|Early Foreclosure Charges||Nil- 4% of outstanding amount|
Some banks offer 12 times of your monthly net income as business loan if you meet all the above mentioned eligibility criteria and if you submit all documents to evidence the same.