Important Criteria to be Aware of Before Applying for a Business Loan

What are the criteria to consider before applying for a business loan?

The application for a business loan is approved quickly if the borrower meets the eligibility criteria and provides the necessary documentation. A primary rule is that the loan taken must be utilized for business only and not for any other purpose. The following are important things borrowers should know before applying for a business loan:

• Age limits

  It is a common business loan criteria for lenders. Every company has its minimum and maximum age limits for availing loans. Financial institutions and other lenders will ask for proof when applying for a business loan. According to the Shriram Finance business loan eligibility and criteria, the minimum and maximum age requirements are 23 and 65 years old, respectively.

• Analysis of Income statements

  Next, lenders make sure the borrower has good financial standing. Organizing the business statements and financial accounts in advance is therefore advisable. These are checked to ensure that the borrower has sufficient funds to repay the borrowed amount without defaulting. Additionally, the borrowers need to declare any prior loan commitments also while applying for a loan.

  Self-employed borrowers, professionals, partnerships, and private limited companies may be subject to different checks. 

  The following income requirements apply to Shriram Finance loans:

  1. For self-employed individuals - Minimum annual turnover of Rs 10 lakhs or more.
  2. For professionals- Minimum annual turnover of Rs10 lakhs or more.
  3. For sole proprietorship or partnerships or private limited companies- Minimum annual turnover of Rs20 lakhs or more.
  4. The business needs to be in operation for more than 3 years.

• Credit analysis

  The creditworthiness of a borrower is based on his prior experiences with loan repayments and whether he has defaulted on any of them. All lenders check this criterion before granting a loan. To qualify for their preferable loan amount and other terms and conditions, borrowers need to maintain a good credit rating. A healthy credit score also represents the financial discipline of the borrower.

• Knowledge of Interest rates

  With the economy growing and multiple lenders on the market, borrowers can get attractive interest rates if they do their research properly. It all depends on the EMIs which a borrower can afford. The Shriram Finance business loan interest rate is one such example of attractive interest rates. Its interest rates begin at 15% and vary for SMEs, MSMEs, and other terms.

• Documentation

  The lender will ask for the proof of all the information submitted by the borrower before approving the loan. Here is a list of general documents required for a business loan application.

  1. Personal KYC documents like Aadhaar card and PAN.
  2. Valid address proof like Passport, driving license, or gas bill.
  3. 2 recent photographs
  4. Proof of Income
  5. Business registration certificate and PAN
  6. Last 6 months bank statement of current account

• Proper design of the business plan

  For a business loan to be approved, the purpose must be clearly defined. It will include everything from the amount needed to the purpose of the funds and how the business plans to repay them. It is, therefore, necessary to prepare a business plan that shows the strengths of the company. Among these are target markets, credentials of the key management overseeing the project, industry data, and more. This information helps lenders determine the risks associated with the business.

• Insurance advantage

  Since the pandemic, everyone has understood that life is uncertain, including financial institutions and other lenders. Thus, before granting a loan, they check if the borrower has insurance. The insurance cover reduces the risk of the lender recovering the amount in case of any unfortunate incident.

• Online application

  Another thing that borrowers should know is that in this digital age, they can apply for an online business loan. Borrowers can check their eligibility easily, submit the necessary information, and then quickly find out how much they can borrow and what their interest rate will be. Now, to apply for business loans online you will require computer knowledge. For this, many companies even offer the facility of online consultants.