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Business Loan Eligibility

Today’s businesses operate at a rapid pace. A sizable portion of this may be attributed to the shift in the financial structure and the growth in individual purchasing power. Fintech, lending, and banking organizations have become more adaptable in their operational norms to accommodate averse users from various backgrounds. The business loan requirements have been adjusted to accommodate a range of applicants, including paid and non-salaried individuals, commercial and agricultural enterprises, and ambitious women entrepreneurs.

You may obtain a business loan from financial institutions to help you develop or extend your business. Numerous banks and non-bank financial companies (NBFCs) provide business loans at favorable interest rates. To obtain a business loan, a lender requests a variety of documentation to establish the loan applicant’s validity and to assure that truthful evidence is obtained during the loan process. The information gathered is used to assess the borrower’s ability to repay the loan on time.


What Are the Eligibility Criteria for Business Loan?

Age Criteria Minimum 21 years and Maximum 65 years
Eligible Entities Individuals, SMEs, MSMEs, sole proprietorship, partnership firms, public and private limited companies, limited liability partnerships, retailers, traders, manufacturers engaged in only services, trading, and manufacturing sectors
Business Vintage Min. 1 years and in profit
Business experience Min. 2 years, business location to remain same
Annual Turnover Min. Rs. 10 lakh and above for existing enterprises
CIBIL Score 650 or above
Nationality Indian citizen should not have defaulted on any previous loan(s)
Additional Criteria Applicant must own either a residence, office, shop, or go down

Documents Required for Business Loan

  • Personal KYC: PAN Card
  • Residential Address Proof (Anyone): Rent agreement, Driver’s License, Voter’s ID, Ration Card, Aadhaar Card, Passport
  • Banking: Last six months’ current account bank statement
  • Business KYC (Anyone): GST registration certificate, shops and establishment certificate
    Financial Documents (For loans greater than 20 Lakhs): 2 years audited financials, last 2yrs ITR, GST returns of 6 months

How Is Business Loan Eligibility Calculated?

Nowadays, a lender will give a business loan without requiring any collateral. It is entirely up to the lender to decide how much risk they are ready to take. It is entirely up to the lender to decide whether to lend to an existing business or a completely new one. They determine who to lend to and how much credit risk may be absorbed.

A business loan is available to any Indian resident who has a partnership or proprietorship firm, a limited or private limited company, or is self-employed. Before approving company loans, the lender analyzes a range of factors. The primary consideration is your capacity to repay. The precise requirements differ for each bank. To qualify for a business loan, you must be the following:

  • Age: The borrower must meet the bank’s age standards, which vary. You should be between the ages of 21 and 60 at the end of the loan period maturity.
  • Income: A consistent and reliable source of income is one of the most crucial elements in determining whether a borrower may obtain a larger loan amount. Your business’s annual revenue should exceed 20 lakhs and demonstrate an upward trend in revenue and profit over the previous two years. Your latest two years’ income tax returns should demonstrate a taxable income of more than 2.5 lakhs per annum.
  • Stability of the business: Stability is a key factor considered for business financing. A more established firm is more likely to obtain lower interest rates than a new one. This is because various lenders in India prefer to lend to small enterprises with established track records in their sector. Thus, if you have been in the same business for years, the lending institution will view this as a favorable indicator. You will be offered more favorable lending terms and simplified payback choices. In contrast, a startup or firm with less expertise would face higher financing rates.
  • Outstanding debts: Borrowers with current debt are more likely to receive a reduced loan amount. A current loan affects the borrower’s ability to repay. Lenders, on the other hand, may not reduce the loan amount if the borrower’s repayment abilities and financial ability are sufficient to afford an extra loan.
  • Creditworthiness: In the loan application procedure, the CIBIL score is crucial. Lenders review your CIBIL score and record every time you apply for a loan. If the applicant’s credit score is poor, the lender may decide not to proceed with the application and will reject it at that time. If your credit score is good, you will automatically qualify for the maximum loan amount and will also qualify for lower interest rates on business loans. Late payments and defaults on loan or credit card EMIs can reduce your eligibility. Therefore, you should constantly strive to maintain a high CIBIL score, 700 or above out of 900, to enhance your loan eligibility for a business loan.

How to Improve Business Loan Eligibility?

  • Product Compatibility

In comparison to financing, lenders have a robust structure and system for granting or rejecting loan sanctions based on a variety of criteria. Thus, before applying for a business loan, the borrower should familiarise himself/herself with the lender’s business loan criteria and apply for the most appropriate one.

  • Cash Flow

Unlike banks, lenders lend money based on profit and favorable cash flow. They do not earn shares in the business and are only entitled to receive interest on the funds loaned. As a result, lenders would disregard the business’s long-term profitability, which is predicted to be created in the future. After the first setup stage, they will typically fund only profitable and cash-flow positive ideas. As a result, as a borrower, you must demonstrate that your firm is successful and that your operations produce enough cash to satisfy all financial obligations.

  • Contribution or Margin

To qualify for a loan, the borrower must have the Contribution or Margin and must invest it. Lenders do not lend 100% of the money necessary for equipment or working capital investment. As a result, the borrower must have sufficient cash to fulfill the margin requirements specified in the loan terms.

For instance, if a borrower wishes to acquire machinery for Rs. 15 lakhs, the lender will grant a 20% margin equipment loan (assumed number). In this scenario, the lender would issue a loan of Rs. 12 lakhs, and the borrower would be required to deposit Rs. 3 lakhs of his or her cash to acquire the machinery. Margin requirements might range between 50% and 10%, depending on the type of the loan and the borrower requirements.

  • Security

The majority of business loan programs involve the creation of the main security using the cash provided by the lenders. If a business loan is used to acquire machinery, the machinery is referred to as main security. If a business loan is taken out for working capital (i.e., raw material or inventory), the principal security will be the raw material, inventory, or receivables. In the event of a loan payment default, the lender would have the authority to hypothecate or sell the principal securities to recuperate losses.

  • Reputation

While authorizing business loans, lenders seek an unblemished track record of loan payback. Before authorizing any loan facilities, they will review your bank statements for the last year and your CIBIL score. In the event of a cheque bounce, a poor CIBIL score, or repayment failures, the likelihood of receiving a bank loan is significantly reduced. Thus, loan applicants should monitor their CIBIL score regularly—especially if they are ready to apply for a business loan.

Types of Business Loans & Their Eligibility Criteria

Business loans are important to the success of every firm. It might be used to cover the early costs of establishing a new organization, to support the business expansion, purchasing additional resources/infrastructure, or obtain the cash necessary to keep the company operating normally between payment cycles.

At present, business financing may seem puzzling. As a business owner, you may always find yourself curious about the best possible way to finance a specific business need, even more so in a competitive world like today.

According to the need, entrepreneurs or business owners are provided with a plethora of options to choose from depending on their eligibility criteria for a business loan.
There are four primary forms of business loans that entrepreneurs in the MSME and SME marketplaces prefer. They are as follows:

Whether you are an offline or online retailer, manufacturer, or seller looking to expand your business, look no further beyond our Flexi-Term loans. Be it for expanding inventory to service demands during the festive season, to expand to a new online platform, or general business expansion, we are a one-stop solution for all your business funding needs.
We provide you with quick funding, flexible repayment tenures, and interest rates based on your eligibility and convenience.

If you are in a business with seasonal variations or need funds to meet your irregular funding requirements, a Line of Credit loan would suit you. Flexi-Line is a product designed for businesses like you. We offer you a credit facility based on your eligibility, which you can use as you deem right at your convenience. And you are charged only for what you utilize.

You are a vendor or a supplier to large corporates or online platforms and have multiple invoices that require your partners to pay back. You are, however, looking for liquidity to meet your obligations while your partners pay you back. Flexi-Invoice Financing solves this problem for you by giving you advanced funds against the invoices so that you can run your business as usual.
We provide quick and seamless loans up to 90% of your invoice amount basis eligibility.

If you are a merchant primarily operating offline, and have a card machine and are accepting credit/debit card payment, and you are looking to expand your business by procuring new inventory or expanding into newer products, for which you need funding, Flexi-Merchant Advance is your product for any loan amount.
We provide quick, affordable, and seamless loans based on your eligibility against your card swipe transactions.


What Is the Maximum Business Loan Amount You Are Eligible for?

To Eligible for the maximum business amount depends on various segments:

  • Age of the Applicant
  • The nature of the business, the applicant’s financial history, the source of revenue, and the applicant’s CIBIL score
  • Revenue and vintage of the business
  • Capacity for repayment and creditworthiness of the applicant
  • Stability or profitability of a business

After checking the above business loan eligibility criteria, FlexiLoans determines the loan amount maximum up to ₹10 crores with flexible repayment options. Our yearly interest rates, which begin at 12%, are quite competitive in India. FlexiLoans is a one-stop shop for unsecured small business loans.


Frequently asked questions

What are the purposes for which I can get a loan via FlexiLoans?

FlexiLoans is here to provide you financial access for your business funding needs. You have to undergo simple and transparent Credit Evaluation, basic documentation before we disburse the loan. You may get loans via FlexiLoans for:
  • Expanding your business
  • Servicing regular working capital needs
  • Managing seasonal working capital requirements
  • Manage short term cash flow gaps

Why should I avail loan via FlexiLoans?

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

What documents are required to apply for a loan?

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months

Are there any charges other than interest rate that I have to pay to avail the loan?

We may charge processing fee to facilitate the loan towards legal and documentation charges. You may be charged penal charges for late or irregular payment behavior.

What is the eligibility of a business loan?

Basic eligibility for business loan is your business should be running for at least 1 year and has monthly total sales of at least ₹2,00,000

How to calculate business loan eligibility?

To check the eligibility click on the link here.

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months

We may charge processing fee to facilitate the loan towards legal and documentation charges. You may be charged penal charges for late or irregular payment behavior.

Basic eligibility for business loan is your business should be running for at least 1 year and has monthly total sales of at least ₹2,00,000

To check the eligibility click on the link here.