Small Business Loans, Eligibility and How to Apply

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Business Loans

For business owners, expansion is one of the most important areas of business. The expansion plan generally has a lot of cash inflows, outflows and other reconstruction of the business. Availability of credit facilities and applying for loans is one of the most convenient methods to expand businesses and also avoid major changes to the ownership of the business. Small businesses should opt for unsecured debt options and hence the lending institutions also prefer the same.


Let us look at the eligibility criteria for the application


  • The age of the individual for applying should be 18 years and above
  • The location of the business should have been the same for at least one year
  • The business should be profitable for at least one year
  • The annual turnover for the existing businesses should be more than Rs. 12 lakhs per annum
  • The credit score should be above 750
  • The nationality of individuals applying for the loan should be Indian and there should be no previous default in payment of any dues
  • The applicants or the business must own a godown, shop or residence
  • The eligible entities for availing of the Business loans are
  • Individuals
  • SMEs and MSMEs
  • Sole proprietorship and partnership firms
  • Public and private limited companies
  • LLPs
  • Retailers and manufacturers only engaged in services
  • Traders
  • Manufacturing sectors

Factors Determining Eligibility


Applicants age

Nature of business

Applicant’s history and credit score

Loan defaults

Business sustainability


Improving Eligibility for The Loan


  • A good credit score is one of the most important factors for eligibility of availing a loan. The tax compliances are direct proof that your organization is complying with all the requirements that are mandatory
  • The business may or may not prosper for a given period of time but the lending organizations will always have a bias toward businesses whose profitability is more than the ordinary ones.
  • The lending organization will help you in the process of availing the loan but providing correct and timely information is the responsibility of the borrower. The KYC and other legal and mandatory proofs have to be correct and updated.
  • The nature of many businesses is volatile and thus the banks or financial institutions will be hesitant to provide loans to the same. But, if the future financial security is properly demonstrated by the borrower then this may not be a cause for concern



Steps to Apply for a Loan


Online Process

  • The financial lender has a website where you can go to the website and make an account.
  • Under the loans section on the website, you can choose the loan that you want to apply for
  • Download the application form and fill in all the details required by the form
  • Submit the application form on the website
  • The lender will then conduct a verification process, for this, a representative will be allotted for every borrower
  • Once the verification and background check is complete, the eligibility criteria are checked
  • If the borrower is eligible for the loan, it is disbursed by the lender


Offline Process


  • If you visit the branch of the lending organization, a representative will guide you to the loans section
  • Fill in all the forms and the required details as directed by the representative
  • The documents will then be verified and the history will be checked by the organization
  • If all the details are found correct the eligibility will be verified
  • If the borrower is eligible, then the lending organization will disburse the loan amount.


Documents Required for the Loan


  • Proof of Identity
  • Proof of Address
  • Proof of Business
  • Property related documents
  • Bank statements for the last 6 months
  • Financial statement for the last two years


Some points to Remember


  • Always look for the right loan when you are borrowing for a specified business purpose. Choose the right loan and compare the important factors such as interest rates, tenure and charges.
  • Always be prepared to arrange for alternative income sources in case you are opting for the loan option. This will give stability to the business and no debt burden.
  • Your eligibility for the loan is not only with respect to documents and profitability. A lot of factors determine the eligibility such as future stability etc.
  • The documents for the loan are to be filed with precision and records to be maintained till the loan is repaid.








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