Business Loan Eligibility Criteria

Business Loan Eligibility Criteria

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There has been tremendous development in the way businesses run their operations today. A major chunk of this can be attributed to the change in the financial model and the increase in purchase power of individuals. Fintech, lending, and banking organisations are now more flexible in their operational protocols and are looking to accommodate a wide variety of users from different walks of life. The business loan eligibility criteria has been tuned to a level which allows it to reach a variety of applicants including salaried and non-salaried, business and agricultural, and aspiring women entrepreneurs.
With this paradigm shift the eligibility criteria for business loan is not very stringent.

Business Loan Eligibility criteria for different types?

Business loans are essential for every organization. It could either be used for meeting the initial expenditure of setting up a new organization or to cater to the business expansion regime of acquiring new resources/infrastructure or it could be to acquire the capital required to sustain the organization in business as usual between payment cycles.
According to the need of the hour, entrepreneurs or business owners are provided with a plethora of options to choose from depending on their eligibility criteria for a business loan.

Predominantly there are 4 types of business loans that are preferred by entrepreneurs from the MSME and SME markets. They are:

Working capital loans:
Working capital loans are a viable option for entrepreneurs who are looking to get a business loan with an EMI model of repayment with tenure as high as 36 months and low Interest rates along with flexible repayment options. The business loan eligibility criteria for raising capital through a working capital loans will require the applying organization to be in business for at least 12 months with an annual business turnover of at least 24 lakh rupees.

Apply for business loan online to get access to quick disbursal, simple documentation, no hidden charges and an opportunity to raise capital to up to INR 1 crore.

Line of Credit:
A line of credit loan is one of the most sought after business loan in the startup space, for, it provides the ease and convenience of flexible repayment, low interest rates, diminishing principal and interest, pre-payment options, and quick disbursal methods.

A line of credit business loan is best suited to meet sudden spurts of unplanned expenses, cover additional procurement expenses in festive seasons, or cater to short term investments.
The eligibility criteria for a business loan like this will require the organization to be in business for at least 12 months with an annual business turnover of INR 24 lakhs.

Vendor Financing:
Medium and Large scale industries often are in business with multiple organizations and rely on invoices to be cleared in time to time. The invoices are not always cleared in time and this creates a rift between flowing income and expenditure. To bridge this gap, organizations often tend to raise capital on the existing invoices that are due to be cleared. This allows organizations to raise capital on incoming finances.

The eligibility criteria for raising capital through vendor financing requires the organization to be operational for at least 12 months with a positive net worth and be a supplier to mid or large size organizations. With vendor financing, the applicants are provided up to 90% of the invoice value with a repayment tenure ranging between 30 to 120 days. While this new business loan eligibility criteria depends on the organization’s credit history and credit score, the credit score of the founder plays an important role too.

Merchant Cash Advance:
A merchant cash advance is a business loan that relies on transactions at POS machines. With a merchant cash advance, the applicant is allowed access to capital with almost instant disbursal period to meet their requirements. A merchant cash advance has a third party lending institution or an individual lender processing the loan.
In this form of raising capital, the repayment is based on the amount of transactions on card swipes at POS machines. The more the sales, the quicker the loan gets cleared with reduced interest rates and tenure. This is best suited for organisations which conduct commerce through online transactions like super markets, restaurants, and fuel stations among others.

The business loan eligibility for these types of loans, unlike other business loans require the organisation to have a registered POS machine for at least 6 months which accepts card payments of at least INR 50,000 per month.
That said, the organisation should have a business history of at least 12 months with an annual turnover of INR twelve lakh rupees.

The common Documents required and eligibility criteria for business loans across all the above mentioned modules include:

  1. Documents Required                  
  • Personal KYC – PAN Card

  1. Residential Address Proof (Any One)
  • Rent Agreement
  • Driving License
  • Voter ID
  • Ration Card
  • Passport

  1. Last 6 months Current Account Bank Statement in Net Banking PDF format

  1. Business KYC (Any One)
  • GST Registration Certificate
  • Shops and Establishment Certificate