Business Loan Eligibility

Funds are the first requirement for creating a business. In almost all cases, the business owner and partners always bring the initial fund to start a business. But as the business grows, additional funds are a must to grow the business. For example, it may require additional funding to purchase a new machine, hire a servant, run an operation, make inventory, or repair equipment. In any case, you need to find a business loan provider for the necessary funds. However, you may also need to meet the business loan provider's business standards.

The business loan eligibility criteria usually depend on the type of business, income, business health, profit loss balance sheet, director or partner's CIBIL score, age limit, and more.

Basic Documents required for a business loan:

• ID Proof and Address Proof
• Proof of Business Stability
• Bank Statement of 12 Months
• Board Resolution (If Pvt. Ltd. company is a co-borrower, then a Partnership Authorization Letter is required
• ITR (Income Tax Return) & Statement of Computation of Income – for last 1 Year
• CA Certified or Audited Profit/Loss Account Statement; for loans>INR 40 Lacs cases Audit report is required along with Profit & Loss and Balance Sheet schedules – for the last three years.
• Latest ITR (Income Tax return) of Co-Applicants – For last 3 Years
• Ownership Proof of Residence or Office

Types of Business Loans in India

How to get a Business Loan?

Step 1: Check your Loan Eligibility

Step 2: Apply Online with the correct Documents

Step 3: Sign the Agreement after tenure and interest are agreed upon

Step 4: Receive loan amount in as less as 2 Days

Step 5: Start operating business with ease

When you are ready to acquire a loan for the business with the required documents, the bank acts by interviewing the borrower. The lender wants to know some information related to the business. Some possible questions are as follows:

Some Questions which Business Loan Provider Banks May Ask You:

1. About your Business plan & Business Model
2. Amount of loan required
3. About where the borrower intends to use the loan
4. Question about personal credit history
5. About collaterals being offered
6. Potential of business to repay the loan
7. Where does the business stand in terms of the present market
8. What is the repayment tenure required?

Factors that impact Business Loan Interest Rate:

1. Financial Health of business
2. Nature of Business
3. Business Plan & Model
4. Business vintage
5. Annual Turnover
6. Profitability & Stability
7. CIBIL Score & Credit History
8. Loan Amount & Repayment Tenure
9. Collateral
10. Lender Type

How to Calculate Interest Rate on Business Loan?

Business Loan EMI is calculated from the below-mentioned formula:

E = P x r x (1+r)n / (1+r) n-1
Here,
E = EMI amount for Repay Loan
P = Principal amount
r = Rate of interest
n = Tenure of Loan

Loan Eligibility Calculator

For Instance:
Business loan amount = ₹ 5 lakh
Interest rate = 20%
Tenure = 3 years
As per the formula, the loan interest rate per month will be 20/12 = 1.66%
Total tenure in months = 3 x 12 = 36 months

Therefore:
EMI= [5,00,000 x 1.66/100 x (1+1.66/100) ^ 36 / [(1+1.66/100) ^ 36 – 1)
You will get your EMI = Rs. 18,582/-

This method is not only time-consuming but also subject to human error. As a reason, it is safer to utilize an online EMI calculator, which is conveniently accessible via the internet.

Loan eligibility or repayment capacity is mainly based on the individual's total profit and current loan EMI.

Many other factors determine loan eligibility, such as age, financial status, other income, credit history, credit score, other financial obligations, and loans.

How to increase Eligibility for Business Loan?

Eligibility for business loans can be increased by:

1. Take out a property or other asset-based secured loan such as a gold loan for a business loan that is easily available.
2. Take steps to improve your credit / CIBIL score (if any). For example, make regular repayment of EMI of the existing loan.