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Understand Unsecured Business Loan Eligibility Criteria for SME

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Dec 20, 2020
Understand Unsecured Business Loan Eligibility Criteria for SME

Funds for SMEs are similar to fuel to an engine. Small and Medium Enterprises (SME) are the most vulnerable business sector as it is under a financial crunch to run the operations smoothly. What can be better than getting an unsecured loan or good faith loan? It allows you to be financially strong without providing any collateral for them. You do not need to present anything more than your creditworthiness. You do not need to furnish documents of your properties or other assets for loan approval under this category of unsecured loan. Since there are no pledged assets in an unsecured loan, the lender needs your signature and a promise to repay the amount with the designated interest rate within the maturity date of the loan tenure. Though unsecured loans sound attractive, you must possess business loan eligibility criteria for SME. It is better to brief yourself about unsecured business loan eligibility criteria to avail this opportunity.

List of Unsecured Business Loan Eligibility Criterias for SME

Since unsecured business loans are not a safe practice for the lenders, they have set specific qualifications to approve the credits. The unsecured business loan eligibility criteria are as follows.

1.Age Criteria

The lender sanctions unsecured business loans to a limited group of people. You are eligible to apply for an unsecured business loan if you are above 21 years of age. The age limit should be between 55-65 years, depending from lender to lender. 

2.Business Age/Vintage Criteria

You can become eligible for an unsecured business loan if your business has a vintage of a minimum of one to three years. Businesses having a good amount of experience in business can help considerably in lowering your business loan interest rate.

3.Business ITR Age Criteria

Lenders approve of unsecured business loans if you have filed for Income Tax Returns in the previous financial year.

4.Business Turnover

A business becomes eligible for an unsecured loan if it has earned a minimum turnover of 24,00,000 INR. An authorized Chartered Accountant should have audited and signed your business accounting sheet to make your SME eligible for an unsecured loan.

5.Banking stability

Since there is no security for the lender for the amount lent out to the borrower, he needs to securitize your bank statement to assess your bank stability. The lender may ask for bank statements for the last six months.

6.Credit Score

Your credit score speaks volumes about your financial trends. Your credit score should not be less than 650 to become eligible for unsecured business loans for SME. Having a decent score above 700 secures your position to apply for unsecured SME business loans.

7.Profitability

No lender will be inclined to take the risk of a loss-making business. Financial institutions will not invest money in SMEs where loan default is foreseeable. You are eligible for SME unsecured loan if your business has been earning profit for consecutive two to three years. 

What Type of Businesses is Eligible for Unsecured Business Loan?

Unsecured business loan eligibility criteria include Small and Medium Enterprises (SME), such as manufacturers, retailers, wholesalers, service providers, traders, etc.

Conclusion

Though unsecured business loans pose risk to the lender, it comes as a blessing for SMEs since it does not have sufficient assets or property to document for sanctioning loans. If you qualify for unsecured business loan eligibility criteria for SME, it is a smooth sail for your enterprise.

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