Business Loan Eligibility

The following entities are eligible to apply for a Business Loan

• Retailers
• Manufacturers
• Traders
• Sole Proprietorship Firms
• SMEs, MSMEs and Large Enterprises
• Partnership Firms involved only in Manufacturing, Trading or Service sectors
• Self-employed individuals/professionals - CAs, Doctors, etc.
• Private limited companies and closely held limited companies

Self Employed Professionals (SEP) are usually Chartered accountants, allopathic doctors, company secretaries, architects, and designers who are practicing a profession.

Self-Employed Non-Professionals (SENP) include individuals such as traders and manufacturers.

Entities: Limited Liability Partnership, Partnerships firms, Private Limited, and closely-held Limited companies are those that fall under this category. This even includes banks and non-banking financial companies who are looking for funds from reputed banks.

Other customer segments are classified based on the business profile on a case by case basis determined by banks. Applicants should check with the bank on their particular policies and procedures for every business loan. The eligibility criteria, documentation requirement, interest rate, and loan tenure differs for every business loan.

Is there an age limit to apply for Business Loans?

Minimum – 21 years

Maximum – 65 years

However, most business loans are given based on the age of the business. The businesses have to have been running for at least 2-3 years with good financial standing.

Income eligibility to apply for Business Loans

Business Loans are given based on the annual turnover of the businesses. A turnover of Rs. 40 lakhs is the minimum consideration. For self-employed professionals, a minimum of Rs.1.5 lakhs per annum should be the minimum annual income.

What are the types of Business Loans available in the market?

Business Loans are mainly of two types – 

• Secured Business Loans
• Unsecured Business Loans

Secured loans for business are those which are given against a personal guarantee or some kind of collateral pledged by the borrower. Secured loans are usually disbursed as Term Loans, Equipment Loans, Vehicle Loans or Loans against Property.

Unsecured loans, on the other hand, are issued on the credibility of the business itself, instead of collateral or guarantee. These loans are usually taken for a short time period of 5-15 days. These are mostly non-fund based credit facilities like OD, Letter of Credit, Bank guarantees and so on.

Factors deciding Business Loan Eligibility:

As mentioned earlier, business loans are availed by small scale business owners to multinational companies. Their revenue forecast is different and so is their business loan needs. The bank has to carefully evaluate the eligibility of the entities to arrive at the appropriate interest rates.

The following criteria are most commonly evaluated while processing a business loan:

Credit score: It is important for the banks to be assured about the repayment capability of the borrower. A high credit score assures that to the bank. The bank will check the company’s credit score to determine credibility. They look into the repayment history on other loans and liabilities you have. A good credit history will help in getting the loan easily with better terms and interest rates.

Business stability: The financial stability of the business is important to sanction the loan. Banks will look into the sales and profit aspects of the business. This can be inferred from your business history and the tenure of your company. Usually, banks prefer companies which have a tenure of atleast 3 years to sanction the loan. Older the business, greater the chance of getting a business loan with favourable interest rate and other conditions.

Business Profitability & Continuity: Another important criteria is that your business should be making considerable profit. Banks wouldn’t want to lend money to a business that is not doing very well. Bank might ask you for the profit & loss statement of the past 2 years. Your organization’s profitability and revenue play an important role in determining if a company can be given a loan or not.

Current relationship with the Bank: Your current standing with the bank is also important. The bank will look into all your relationships with the bank. The cash flow and payments on your account. It will also see your repayment history on any existing loans you have with the bank.

Collateral: Though many government schemes give collateral free business loans, the borrower can pledge some kind of collateral, that he is comfortable with, to get better loan terms and interest rates. The government guidelines state that collateral is not mandatory, the applicant is free to provide some. Pledging a collateral acts as additional security on the loan, allowing for higher loan amounts and lesser interest rates.

How can I improve my eligibility for a Business Loan?

Prepare a solid Business Plan: While submitting your loan application, make sure that you have a solid business plan. The plan should elaborate on the financial outcome for the foreseeable future. It should show stability and growth while underlining the security and risk factors of the business to the lender. A well-executed business plan will elucidate confidence to the lender on you to sanction a business loan with lower interest rate.

Have strong documentation: Business Loan applications require a number of supporting documents pertaining to your current establishment and the planned project. Make sure that you have all the latest documents and proofs to support your business plan. Avoid any misleading or ambiguous documentation or information. Proper documentation assures the lender of your genuineness.

Learn about Special Business Loans: Banks keep offering special discounts and offers on Business Loans from time to time. Keep out an eye for these special offers to make the best of them. They might also introduce some limited time schemes for specific business owners with attractive terms and conditions. It is good to be updated with all the latest offers and discounts so that you can get a good loan for your business.

Go for Government Schemes: The Government of India has numerous schemes to help the MSME Sector. They have the CGTMSE credit scheme, The MUDRA Yojana, The PMMY Scheme and many more for the benefit of entrepreneurs in this country. Banks are appointed as the primary point of contacts for these schemes. Read about these schemes carefully and choose the best one to suit your needs. The government has websites and other resources to help you with these schemes. Make use of them to get the best out of these Governments schemes.

Comparison of Business Loan Eligibility across various banks & NBFCs

Axis Bank Business Loans

Axis Bank Business Loans can be availed with a long tenure of up to 15 years. They offer competitive interest rates and doorstep document collection.

Documents Required:

• Proof of identity (passport/ voter’s ID/ driving license/ PAN card/ Aaadhar card)
• Proof of address (latest utility bill/ ration card/passport)
• Proof of income (Salary slip of last 6 months, 6 months’ bank statement, form 16 of current year)
• All the lease documents (if applicable)

Eligibility Criteria:

• The minimum age of the applicant should be at least 24 years. The maximum age of the applicant can be 65 years.
• The salaried applicant should be working in a reputed private company or a government company
• Any self-employed filling the income tax return can apply

ICICI Bank Business Loans

Documents Required:

• Filled application form
• 2 Passport Size Photo
• Valid identity proof (passport/ voter’s ID/ driving license/ PAN card/ Aaadhar card)
• Valid address proof (latest utility bill/ ration card/passport)
• Financial documents: income tax return & profit & loss & balance sheet of last 2 years, last 6 months’ bank statement & business proof.
• Current year performance and projected turnover on letterhead of the entity

Eligibility Criteria:

• The minimum age of the applicant should be of 25 years. The maximum age of the applicant should not exceed to 65 years
• The business should be making profit for the last 1 year.

HDFC Bank Business Loans

• Minimum turnover of Rs. 40 lakhs 
• Minimum business age of 3 years 
• The business must have been making profits for atleast 2 years
• Minimum Annual Income (ITR) of Rs.1.5 lakhs 
• Age limit of applicant should be minimum 21 years & maximum 65 years

Tata Capital Business Loans

Eligibility Criteria:

• Minimum age of the applicant is 25 years in case of salaried applicant. The maximum age limit for self-employed applicants is 65.
• The business should be running profitably for last 3 years
• The business should have a turnover of Rs.40 lakhs & the turnover should be increasing throughout the time.
• The firm should have the Income tax return filed for at least Rs. 3 lakhs.

Documents Required:

• 2 Passport Size Photo
• Valid identity proof (passport/ voter’s id/ driving license/ PAN card/ Aadhar card)
• Valid address proof 
• Last 3 months’ salary slip, last 3 months’ bank statement & form 16 for salaried applicants, last 6 months’ bank statement & profit & loss & balance sheet of last 2 years for self-employed applicants.
• Sole Proprietorship Declaration / Certified copy of Partnership Deed / Certified copy of MOA, AOA & Board resolution. In case of income derived from a partnership firm, the latest 2 years’ partnership firm’s B/S, P&L a/c with all schedules certified by a CA for self-employed professionals.

Fullerton India Business Loans

• Applicants should be at least 27 years old under the ‘Self-Employed Business Category’
• Relaxation of up to 2 years is provided for non-professionals
• Maximum age limit is 65 years

Business Loan Eligibility FAQs: