Understanding Business Loan Eligibility

Both starting and running a business leads to lots of financial pressure, you need to have a good amount of running capital to ensure that things go smoothly. However, if your business is doing good and making sufficient money to maintain its capital flow, you are safe. But taking your business to that level needs lots of hard work along with the findings.

Running a business has a lot of planning among which arranging funds is one of the most important things. Business loans can be a great help as they provide your funds specifically for your venture. These loans are available with most of the lenders and can be availed easily. But, in terms to approve a business loan application, lends have fixed their eligibility criteria. If you manage to fulfill those eligibility criteria you get the funds, and if you fail to fulfill them your application gets rejected. 

In this article, we will be discussing those factors which affect your business loan eligibility. 

Age:

Your age is one of the first things that a lender will look for when you apply for a business loan. In case you are younger than twenty-five or older than sixty, it becomes hard for you to find a bank or an NBFC that is willing to lend you a business loan. This is because age is an important factor when availing a business loan as it decides your repayment ability. 

A well-thought-out Business Plan: 

Producing a well written and pragmatic business plan always works. It provides lenders a brief idea about your business needs & goals as well. A business plan should always include three important things which are:

  1. How many funds do you need for your business?
  2. Where are you going to invest in the funds? 
  3. How do you plan to repay the borrowed money?

Income

If your business is existing in the market for one year or longer than that, then you need to submit the income proof for your business. And in terms to get approved for the loan your business should be making a good amount of money. In case your business is just a start-up you need to show your business plan and it’s a potential growth strategy. 

This gives an impression to the lenders that the business or company which is not making enough money cannot pay back the loan amount, and hence consider them as not to be eligible for a business loan.

Documents:

Your business loan eligibility is also dependent on a few documents.

And to be considered worthy for business credit, you have to submit your business certificate, documents for proprietorship verification, Form 16 of the last two years, your business & personal account statement, business licenses from the governing authorities. On the off chance that you satisfy every one of these criteria, you are qualified for a business loan.

Credit History:

Your credit history has a significant role in the acceptance and rejections of your business loans. Your credit history reflects your credibility and ability to repay the borrowed amount. On the off chance that you have been terrible at taking care of your previous loans, you may get rejected for this loan. 

So, if you are planning to opt for a loan in the near future, try to be timely for your ongoing loan payments. Talking about credit history, your CIBIL is the reflection of it. A CIBIL score above 700 is considered good and lenders feel free to lend them. Whereas a CIBIL score of below 700 is considered low and lenders hesitate to lend to such applicants. 

Cash Flow:

Lenders hesitate to lend you if you have insufficient cash flow in your business. 

So having a good cash flow is yet another factor that determines your business loan eligibility. However, you can always optimize the cash flow in your business by taking preventive measures quarterly. To keep your business finances in control and up to date- by doing this you will get timely updates regarding where you need to limit your cash flow and where you need to spend more. Remember keeping eyes on your cash flow and finances always lead to your goals. 

Applying for a business loan is a short and easy process. But to avoid rejections, you need to fulfill the eligibility criteria of your lender. Be smart to know the problems in advance that your loan application might face. This will help you to eliminate those problems & get approved for a business loan.