Business Loan Eligibility: Requirements, Rates & EMI Guide

The eligibility of business loans is not determined only by the amount of money required for a particular business. The lending institution usually takes into consideration several other aspects like vintage of the business, turnover, profitability, existing debts, repayment record, banking activity, and credit rating of the business.

While choosing a business loan interest rate, a businessman must verify his eligibility.

Planning to apply for a business loan? Review your finances and estimate your repayment capacity before submitting applications.

Criteria for Qualifying for a Business Loan

These include:

1. Age and stability of the business

2. Turnover and profits of the business

3. Banking transactions and cash flow

4. Existing loans and liabilities

5. Credit record of the business and owner/management

6. Loan requirement and repayment ability

7. Registration and documents of the business

The business loan rate of interest that is provided by the lender may depend upon all these considerations. Hence, the rate of interest on business loans published should not be considered the actual rate for all borrowers.

A loan calculator may help to calculate the EMI for various amounts, interest rates and tenure of the loan.

Before choosing a lender, compare the total borrowing cost, processing charges, tenure and EMI—not just the headline interest rate.

Comparison of Business Loan Offerings

Businesses can find loan offerings like HDFC business loan, Bajaj business loan, IDFC business loan, Kotak business loan or Axis Bank business loan when seeking business finance.

However, the criteria for eligibility, documentation, loan amount and business loan interest rate will differ from one lending institution to another as well as from individual to individual. Hence, the comparison should be made on the entire loan offering and not on the name of the lending institution.

The small business loan can be used by the borrower for various purposes as per the permission of the lending institution.

We at PrimeScore suggest that the small business loan can be used by the borrower for various purposes as per the permission of the lending institution.

Government Subsidies

There are some businesspersons who will look out for a government subsidy loan for business when searching for cheap sources of financing. The subsidy schemes come with some unique requirements like eligibility criteria, type of businesses among others. One should not automatically take it for granted that a subsidy implies low-interest rate and automatic approval.

Check the official scheme requirements carefully before paying any intermediary or submitting sensitive financial documents.

Conclusion

A good business loan need not be one with the lowest advertised business loan rate of interest. An ideal loan must suit the borrowing ability, cash flow and funding needs of the company.

PrimeScore could assist in knowing one’s credit standing and detecting any discrepancies in the credit report that would require fixing.

Before you borrow, verify your eligibility and do not borrow beyond your repayment ability.

FAQs

1. What aspects may influence business loan eligibility?

Age of the business, turnover, profitability, credit history, debts, banking record, and repayment ability may play a role.

2. Is low interest on business loan always beneficial?

No, it is necessary to consider processing fee, loan tenure, EMI, total interest, etc.

3. Can one use a loan calculator in advance?

Yes, it will give an approximation of EMI and total amount that need to be repaid for varying loan amounts, interest rate, and loan tenure.

4. Can small firms apply for business loan?

Yes, there are many banks that offer loans tailored to small firms and meet their eligibility criteria.

5. Is a government subsidy loan for business available to each businessman?

No, as there are certain eligibility criteria of these loans.