Acquiring the right business loan can be a transformative factor when launching or scaling up a business. These unsecured loans provide the financial means to address various business needs, from procuring new inventory to covering employee salaries.

Nevertheless, the initial step involves conducting a thorough assessment of your business loan eligibility before proceeding with the application.

In order to qualify for a business loan, your business needs to meet specific criteria set forth by the lender. Presented below is a checklist to determine your eligibility for business loans.

Eligibility Check for Business Loans Before granting approval for your loan, lenders evaluate your capacity to repay it. This is achieved through a comprehensive examination of your business loan eligibility. Familiarizing yourself with the factors crucial to the lender’s decision-making process can significantly enhance your chances of securing a business loan.

1. Age Requirement This criterion ascertains whether you are of legal age to enter into a loan agreement and fulfill repayment obligations. There are minimum and maximum age limits established for this requirement. At the time of applying for the loan, you should be at least 21 years old and not exceed 65 years by the time of the final loan installment.

To determine eligibility for business loans based on this factor, you will need to provide valid documentation as proof of age. Acceptable documents include your Aadhar card, Voter ID, Birth Certificate, or PAN Card.

2. Business Profitability The profitability of your business serves as an indicator for lenders to assess whether your revenue generation is sufficient to support loan repayments. The financial stability of your business is a pivotal consideration in the lender’s assessment of business loan eligibility, particularly for new ventures.

Evidence of income is required to demonstrate your business’s profitability. This entails submitting documents such as Income Tax Returns and Computation of Income, tax audit reports, profit-loss statements, and balance sheets. These documents must cover the previous two fiscal years and should be duly verified, signed, and certified by a registered chartered accountant.

3. Business Stability A key criterion for clearing the business loan eligibility assessment is establishing the stability of your business. The duration for which a business has been operational impacts how stable it is perceived by lenders. This longevity signifies the resilience and endurance of your business.

Additionally, business stability reflects your enterprise’s ability to withstand shifts in the market landscape. Lenders may analyze various financial ratios that provide insights into your business’s health.

To gauge your business’s eligibility, you can assess favorable indicators such as the current ratio, debt-to-equity ratio, and others. Efficiency ratios related to turnover, inventory-to-asset ratios, and collection periods might also be evaluated by lenders.

4. Bank Balance Your bank balance serves as an indicator of your financial solidity and business profitability, which lenders use to evaluate your eligibility for a business loan. To meet the eligibility criteria, your bank balance should exhibit stability for at least six months.

A healthy bank balance demonstrates to the lender that you can meet loan obligations and that your business possesses liquidity and positive cash flow to support its operations.

To facilitate the assessment of your eligibility, submitting bank statements for the preceding six months is a requirement of the application process.

5. Credit Score Your credit score serves as a barometer of your reliability as a loan applicant. This crucial metric reflects your creditworthiness and credit history. A higher credit score enhances your likelihood of securing a loan.

For business loans, lenders review both personal and business credit scores. A credit score surpassing 650 bolsters your eligibility for a loan. It also qualifies you for larger loan amounts and more competitive interest rates.

6. Business Plan Lenders factor in your business’s potential for success as part of the business loan approval process. The most effective way to communicate your business’s credibility to lenders is through a well-crafted business plan.

This aspect is particularly vital for new businesses in terms of business loan eligibility, as the business plan delineates your vision, future strategies, competitive advantages, and commitment to professionalism.

To ensure your eligibility for a business loan, develop a robust business plan that underscores your business’s profitability and longevity. This will help persuade lenders of your qualification for business loan assessments.

How to Check Your Credit Score? You can obtain your credit score at no cost through a simple process on the Tata Capital website or the Moneyfy app. Here’s what you need to do:

1. If you’re a new customer, provide your details, including name, email, mobile number, Aadhar, and PAN numbers, to register. Once you receive a one-time password (OTP) on your registered contact, your credit score will be calculated upon entering the OTP.
2. Existing customers can log in using their registered mobile number. Generate and submit the OTP to access your credit score.

In Conclusion To fulfill all the checkboxes for business loan eligibility, adhere to these guidelines:

1. Enhance and maintain your credit score by punctually repaying loans, managing a diverse credit portfolio, and maintaining a low credit card utilization rate.
2. Streamline cash flow and expenses to sustain a favorable and stable bank balance over time.
3. File your income tax returns and income computation on schedule.
4. Craft a comprehensive business plan that showcases your business’s potential for growth and profitability.
5. Consider applying for a business loan from a financial institution offering competitive interest rates, a streamlined application process, and swift approvals, such as Tata Capital.

Whether your business requires a loan for daily expenditures or to support operational expansion, submitting an application to LICHFL can fulfill your needs.