7 Factors That Determine Your Business Loan Eligibility
Business loans are extremely useful to enhance the performance of your business. It assists in business expansion, purchasing heavy equipment, buying the raw materials, and meeting other business requirements.
However, you must be eligible to avail a business loan. In case you fail to meet the business loan eligibility criteria then your application may be rejected.
Check out the major business loan eligibility criteria:
Many lenders have set an age criterion of minimum of 21 years. However, there are few lenders that may allow you to avail a business loan at a minimum age of 25 years. The maximum allowed age limit may be 60 years. It means, you cannot avail a business loan if you have reached the age of 60. Thus, your age is a major criterion considered by the lender before approving your application.
Business loan amount is determined based upon your business annual income. In case you are looking to avail a business loan of a high loan amount for a long term then you should have a high business turnover. The turnover of your business helps the lender to determine the loan amount you are eligible for.
Lenders ask for business vintage proof, identity proof, income proof and address proof. Thus, you must submit all the necessary documents linked to your business. Your loan application may be rejected if you fail to provide business loan documents related to your business. Thus, documents may even impact your loan eligibility to avail a business loan from the lender. However, there are few digital lending institutions that may approve your business loan without income tax return.
If you fail to prove your business age, then there may be high chances of your application rejection. Few lenders may ask you to provide a long vintage period, which you can show by providing your ITR. On the contrary, there are few lenders that require a business vintage period of only one year. So, your business age is one of the important parameters impacting your business loan eligibility.
Your eligibility for a business loan may get impacted if you do not state the purpose for availing the loan. Lenders may even ask you to provide a repayment plan for the loan. Loan eligibility criterion is even impacted by the loan amount you are looking to avail. In case the loan amount is on the higher end, then the bank requires you to provide a long vintage period and a high turnover.
Past repayment record
Each lender evaluates your repayment track record before approving your loan application. For this, they review your credit score. If you hold a negative credit score, then your chances of business loan rejection are very high. Thus, ensure to maintain a high credit score of 750 and above.
Cash flow in your business activities play a crucial role in deciding your loan eligibility. Eligibility criteria may be lenient if your company has a healthy cash flow. Ensure to manage your cash flow effectively so that liquidity stays in your business.
Growing your business is not only rewarding but also challenging. Businesses require funds to contend, expand, evolve, and advance in a dynamic market. Business loan is one of the most prudent ways to do so. While most business loans require collateral or security, there are few lenders who may provide collateral free loans. Note that the unsecured business loan eligibility depends on factors like your credit score, financial statements, revenue etc. In case you are unable to provide any of these proofs, you may not be able to avail a business loan.