There is a lot of financial pressure both in starting and running a business, you need a good amount of running to make sure things go smoothly. However, if your business is good and earning enough money to maintain its capital flow, then you are safe. But to get your business to that level requires a lot of hard work along with the findings.
There are a lot of plans for running a business, of which arranging funds is one of the most important things. Business loans can be a great help as they provide your funds exclusively for your enterprise. These loans are available with most lenders and can be availed easily. But, to approve a commercial loan application, the lenders have set their eligibility criteria. Your application is rejected if you manage to meet the eligibility criteria that you receive the funds from, and if you fail to meet them.
In this article, we will discuss the factors that affect your business loan eligibility.
Age:
Your age is one of the first things a lender will look for when you apply for a business loan. If you are younger than twenty-five years of age or over sixty, it becomes difficult for you to find a bank or an NBFC that is ready to give you a business loan. This is because age is an important factor when availing a business loan as it determines your repayment ability.
Creating a well-written and practical business plan always works. This gives lenders a brief idea about your business needs and goals.
A business plan should always include three important things which are:
- How many funds do you need for your business?
- Where are you going to invest in the fund?
- What is your plan to repay the loan money?
Income:
If your business has been in the market for a year or more, then you will have to produce income proof for your business. And to be approved for a loan your business must make a good amount of money. If your business is only a start-up, then you need to show your business plan and a possible growth strategy to it.
This gives lenders the impression that a business or company that is not making enough money cannot afford to repay the loan amount, and is therefore not considered eligible for a business loan.
Documents:
Your business loan eligibility is also dependent on a few documents. And to be considered worthy for business credit, you have to submit your business certificate, documents for proprietorship verification, Form 16 of the last two years, your business & personal account statement, business licenses from the governing authorities. On the off chance that you satisfy every one of these criteria, you are qualified for a business loan.
Credit History:
Your credit history plays an important role in the approval and rejection of your business loans. Your credit history shows your credibility and ability to repay the borrowed amount. On the occasion that you are terrible at taking care of your past debts, you may get rejected for this loan.
Therefore, if you plan to opt for a loan in the near future, then make timely efforts for your ongoing loan payments. Speaking of credit history, your CIBIL is a reflection of this. CIBIL scores above 700 are considered good and lenders feel free to lend them. While a CIBIL score below 700 is considered low and lenders hesitate to lend to such applicants.
Cash Flow:
If you have insufficient cash flow in your business, lenders hesitate to lend you. So, having a good cash flow is yet another factor that determines your business credit worthiness. However, you can always optimize the cash flow in your business by taking preventive measures. To keep your business finances under control and up-to-date - by doing this you will get timely updates regarding limiting your cash flow and where you need to spend more. Remember that keeping an eye on your cash flow and finances always meets your goals.
Applying for a business loan is a short and easy process. But to avoid rejection, you need to meet your lender's eligibility criteria. Be smart to know in advance the problems facing your loan application. This will help you eliminate those problems and get approved for business loans.
Comments
Post a Comment