How do I qualify for a business term loan?

To qualify for a business term loan, there are some key eligibility criteria set by banks and NBFCs that borrowers typically need to meet:

• Business Vintage: Financial institutions prefer extending term loans to companies that have been operational for at least 3 years. Startups may qualify, but only after stringent screening.
• Business Financials: Your business should have been profitable with steady cash flows and revenue growth in recent years. This demonstrates repayment capability.
• Credit Score: A high personal and business credit score enhances your chances of loan approval. It indicates creditworthiness.
• Collateral: Strong collateral in the form of property, equipment, and FDs boosts your eligibility. Some lenders may not need collateral if you have an excellent credit score.
• Documentation: Tax returns, financial statements, Know Your Customer (KYC) documents, and business paperwork need to be in order. Having audited or well-maintained accounts helps.
• Existing Loans: Your current debt levels and repayment track record of existing loans are checked. Higher debt can diminish eligibility.
• Business Plan: A viable business plan detailing how you will utilise the loan and repay it can improve the chances of sanction.
• Presence of Co-applicant: In some cases, loan providers prefer a co-applicant or guarantor to share responsibility for repayment.