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ELIGIBILITY CRITERIA FOR BUSINESS LOANS IN INDIA – WHAT YOU MUST KNOW
A loan that is meant for companies to pay for expenses, business loans help in paying expenses like employee salaries, office supplies, office building rents, and so on until your business pulls off the ground or get investment. Today, banks and non-banking financial corporations in India offer business loans at attractive interest rates, flexible payment tenure, and many other benefits that help businesses as a whole. You can even apply for business loans online for quicker approval and disbursal. However, before applying for the loan, you will need to have a clear roadmap of your business and how you intend to spend the loan amount; most lenders ask for it. Establishing a successful business in the country or globally is probably a dream that you must be seeing for a long time. With this blog, we will help you understand the eligibility criteria for business loans and what are the documents needed. But before that, let’s talk about the types of business loans that you can get.
Types of Business Loans
There are two types of business loans that you can get for your business – one is a secured loan and the other one is an unsecured loan. Business owners need to be aware of both these types of loans as it will make your decision of getting a loan easier. Before moving on to the eligibility for MSME loans, here is what you need to know about the types of loans –
Secured Loans: These are loans where the burden of risk lays on the borrower. In secured loans, the business-related device or valuable is pledged as collateral. If you are unable to repay the loan amount and/or there are defaults in the repayment, the pledged collateral will be possessed by the bank, non-banking financial corporation or the lender from who you avail the loan. For secured business or SME loans, meeting this eligibility of pledging collateral is important.
The financial corporations will resell the collateral to balance the non-paid amount of the loan. The lender will not seize your collateral immediately; if there is a gap in paying the EMI by a few days, the bank or NBFC will give you time to make the payment. However, if you keep missing the payment, the collateral will be seized.
Unsecured Loans: Unsecured loans are those where the risk lays more on the lender than the one borrowing the loan. For business capital, an unsecured loan is, maybe, a little difficult to avail. However, if the amount required is low, you may get a business loan. But again, the amount of unsecured business loan approval depends on the new business loan eligibility of the bank or the non-banking financial corporation from whom you are availing the loan. If you want to get an unsecured loan, make sure that the capital requirement of your business is defined well and that, you have a commendable credit history. To apply for a small business loan with Muthoot Finance, check out the website.
Business Loan Eligibility: The Criteria that You Need to Meet
More or less, banks and other lenders like NBFCs, have the same eligibility criteria for business loans. However, there might be a few extra ones here and there, depending upon the lender. Given below are the most common business or MSME loan eligibility criteria that you have to meet –
Age of the Applicant: The minimum age of the applicant should be at least 18 years or above. The upper age limit varies from lender to lender.
Nationality: The applicant should be a citizen of India. The applicant must not hold any criminal record, whatsoever.
Credit Score: Credit score is an important small business loan eligibility criterion. A score of 700 or above is considered excellent. Adding to this, the applicant should not have any previous loan default with any bank or financial institution in India.
Who Can Apply: The business should be formed as a private or public limited company or limited liability partnership (LLP) or sole proprietorship or partnership. Individuals, SMEs, MSMEs, retailers, traders, and manufacturers engaged in only services, trading, and manufacturing sectors are also eligible for getting a business loan.
Startup Business Loan Eligibility: Documents Required
The documents required for getting a business loan in India are as follows –
Duly filled loan application form.
A detailed, self-drafted business plan.
KYC documents like AADHAR Card, PAN Card, Passport, Utility Bills, and so on. If the startup is in partnership, then the KYC documents of all the partners are needed.
ITR and bank statements of the last 12 months.
In addition to these, your lender may or may not ask for a few more documents, as per their requirement or policy. The age, nature of business, business turnover, creditworthiness, an additional source of income, financial history, and so on also decide the business loan eligibility. Make sure to go through your lender’s terms and condition thoroughly before applying for the loan.
Muthoot Finance is India’s most trusted financial services company that offers financial services like gold loans, forex, money transfer, business loan, personal loan, and so on. At Muthoot Finance, we make our customers happy by offering them benefits that are par excellence.