What are the eligibility criteria of getting a Business loan?
Written by Web Desk Team | Published :July 11, 2023 , 8:42 am IST
India is growing in every sphere & expansions are happening in various industries. For these expansions, businesses require loans from time to time. These businesses can be large, startups or other categories. Though most of the people know about business loans but the insights or criteria of the same are still not that clear to the most of the masses. The eligibility criteria for getting a business loan can vary depending on the lender and the specific loan product. However, here are some common eligibility criteria that lenders typically consider:
- Business Age and Stability: Lenders often require a minimum operational period for the business, usually ranging from 1 to 3 years. They prefer lending to established businesses with a stable track record.
- Business Type: Lenders may have specific preferences regarding the type of business they lend to. Some sectors or industries may be considered higher risk or may have specific regulations that affect eligibility.
- Annual Revenue: Lenders assess the annual turnover or revenue of the business to evaluate its financial stability and repayment capacity. The minimum revenue requirement varies between lenders and loan products.
- Credit Score and History: Lenders typically check the credit score and credit history of the business, as well as the personal credit history of the business owner(s). A good credit score demonstrates a history of timely repayments and increases the chances of loan approval.
- Financial Statements and Documents: Lenders often require the submission of financial statements, such as balance sheets, profit and loss statements, and cash flow statements, to assess the financial health of the business. They may also request additional documents like bank statements, tax returns, business licenses, and legal documents.
- Collateral: Depending on the loan amount and type, lenders may require collateral, such as property, equipment, or inventory, to secure the loan. The value of the collateral should be sufficient to cover the loan amount.
- Debt-to-Income Ratio: Lenders analyze the debt-to-income ratio of the business to determine if it can comfortably manage additional debt obligations. A lower debt-to-income ratio increases the chances of loan approval.
It’s important to note that these criteria can vary among lenders, and additional factors may be considered based on the specific loan requirements.IIFl being the market leader in this segment can help the consumer to decode the details of a business loan. Log on to IIFL.com for more clarity on business loans.
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