How Much Turnover Should I Have for a Business Loan

Securing a business loan can drive growth, especially for MSMEs and new enterprises. With various loan options and eligibility criteria, turnover becomes a key factor. By understanding the requirements, you can confidently apply for the right business loan to strengthen your business’s financial position. This guide covers turnover requirements, essential loan types, and basic eligibility criteria to help you prepare for a business loan application.

Basic Requirements for Securing a Business Loan

Before applying for a loan, lenders assess your venture’s financial health through several indicators. These include:

1. Turnover: This number indicates your business’s annual revenue and helps lenders gauge your repayment capacity.
2. Credit Score: Your credit score impacts your loan eligibility for both collateral-free loans and secured loans. Lenders generally prefer a credit score of 750 or above.
3. Documentation: The documents required for a business loan include identity proof, business registration, financial statements and bank statements.
4. Collateral: Many business loans are available without collateral, such as MSME loans. However, providing collateral can strengthen your application and help you obtain better terms.

Making sure your turnover meets the lender’s minimum requirements improves your chances for a smooth approval process.

Turnover Requirements for Different Loan Types

1. Working Capital Loans

Working capital loans cover short-term business needs, such as inventory purchases or managing cash flow gaps. They don’t require high turnover since they target SMEs. Lenders generally look for an annual turnover of ₹25 to ₹50 lakh when approving working capital loans for MSMEs and new businesses.

2. Term Loans

These loans provide a lump sum that you repay over a fixed term, making them suitable for larger projects or expansion efforts. Banks and NBFCs usually require a minimum turnover of ₹50 lakh, though some lenders may approve lesser turnover for MSMEs. Term loans offer flexibility, enabling businesses to tackle significant expenses with manageable repayment schedules.

3. MSME Loans

Designed for micro, small and medium enterprises, MSME loans provide capital without requiring collateral. Lenders accept a lenient annual turnover, typically around ₹10 to ₹15 lakh, for MSME loans since these businesses are often in growth stages.

FlexiLoans offers MSME loans with minimal documentation and no collateral, making it easier for you to secure funds quickly.

4. Machinery Loans

Machinery loans fund the purchase of essential equipment required for your business. Lenders set a higher turnover benchmark for these loans, generally between ₹50 lakh and ₹1 crore annually, due to the high cost of machinery. However, certain machinery loans have lower requirements for MSMEs and smaller businesses.

5. Line of Credit

A line of credit provides a flexible way to manage cash flow fluctuations. Most lenders look for a moderate annual turnover of at least ₹25 lakh. A line of credit loan allows you to draw funds as needed and offers flexible repayment options.

6. Small Business Loans

These loans support daily operations, minor expansions or specific projects. Many lenders approve small business loans with annual turnover requirements between ₹10 and ₹30 lakh. Online small business loans offer quick approval processes for eligible applicants.

Additional Factors That Influence Turnover Requirements

1. Business Longevity

Companies operating for at least two to three years often receive more favourable terms than newer ones.

2. Industry

Businesses in stable industries, such as manufacturing or IT, often have lower turnover requirements. High-risk industries or those with seasonality may need stronger turnover figures to demonstrate stable revenue.

3. Credit Score and Financial Health

A strong credit score positively impacts your eligibility, potentially lowering the requirements for a business loan. Consistent cash flow management further enhances your credibility with lenders.

Conclusion

Business turnover helps lenders assess repayment capacity, but minimum requirements can vary. By ensuring your annual figures meet these standards, you can confidently seek loans suited to your growth needs. Whether looking to fill cash flow gaps, purchase machinery or expand operations, having the right information empowers you to secure suitable funding.

When you apply for a business loan, consider FlexiLoans for a smooth and hassle-free experience. Specially designed for MSMEs, FlexiLoans provides collateral-free business loans with minimal documentation and quick approvals. By offering flexible financing solutions, FlexiLoans simplifies the process of securing funds, helping your business reach its full potential.

FAQs

Q1. What Is the Minimum Turnover for a Business Loan?
The amount varies by loan type, typically starting from ₹10 lakh for MSME loans to ₹50 lakh or more for larger term loans.

Q2. Are Loans Available Without Collateral?
Yes, many lenders, including FlexiLoans, offer collateral-free loans suitable for small and medium enterprises.

Q3. Can a Good Credit Score Impact Turnover Requirements?
Yes, a strong credit history can enhance eligibility and potentially lower turnover standards.

Q4. What Documents Are Necessary for a Business Loan?
Commonly required documents include identity proof, registration records, financial statements and bank data. FlexiLoans simplifies this process with minimal documentation.

Q5. Can FlexiLoans Help with Turnover-Related Challenges?
Yes, FlexiLoans offers various loan products with adaptable turnover criteria to support growing ventures.

Q6. How do I use an EMI calculator?
An EMI calculator helps estimate monthly repayment based on the amount borrowed, interest rate and loan tenure. You simply need to enter these variables into the calculator, and it will instantly display the output.