Business Loan Eligibility and Required Documents

Last Updated: 15 Oct 2024

As a business owner, you may find yourself needing a loan to stabilise the ebbs and flows of cash entering and exiting your company. We offer quick access to financing, which might assist you in maintaining the operations of your company.

A business loan can be used to develop the business, buy new equipment, renovate an existing one, or raise the working capital. Various Lenders offers loans starting at Rs 50,000 and going up to Rs 2 crores.

Criteria for different lenders

Who can apply for a business loan?

• Self Employed Professional:

  To be eligible for the loan, the professional must meet the necessary qualifications and skills. Physicians, engineers, chartered accountants, and management consultants must also present verification of their credentials.

• Private Limited / Limited Company:

  The business’s net yearly income must be greater than Rs1.5 lakhs in order to qualify for loans up to Rs15 lakhs. The business’s net yearly income must be greater than Rs3 lakh to qualify for loans beyond Rs15 lakh.

• Proprietorship Firms / Limited liability Firms:

  To satisfy the basic requirements of the potential lender, the company must have the profit and loss statements.

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Some other criteria which the borrowers need to meet, these could vary depending on the lender:

• The borrower’s age should fall between 21 and 65.
• The company should have generated cash earnings over the previous two fiscal years.
• It is necessary for a licensed chartered accountant to audit the company’s balance sheet.
• The company should make at least Rs40 lakhs in revenue.
• Borrowers must have a minimum of 3 years’ expertise in the current industry and 5 years’ worth of overall business experience.
• The businesses should have generated profits during the past two years.

What documents are required for a business loan?

The documents required for a business loan are:

Valid Photo ID Proof:

Passport, Voter ID, Aadhar Card (Any 1)

Bank Statement:

Certified bank statements of the applicant for the past 6 months

Proof of Business:

• Sales Tax certificate or a business licence
• Ownership records
• Deeds for a sole proprietorship or a partnership
• Two most recent fiscal years’ worth of income tax returns
• For the last two fiscal years’ worth of profit and loss statements
• Financial statements from prior years

How do I repay the business Loan?

Depending on suitability of either option, the loan may be repaid with EMIs or biweekly payments.

With the National Automated Clearing House (NACH), an automated and recurring payment system, these EMIs may be paid. Your account will be automatically debited for the amount at the intervals you specify.

Interest Rates and tenures for Business Loans

Usually, a processing fee of 2 to 3% of the loan amount will be charged for the business loan. Repayment tenures vary from one month to three years depending on the lender. There are two different payment options: biweekly and monthly.

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Formula used to calculate EMI on Business loans: EMI = Principal x r x (1+r)n/(1+r)n-1 Here, r is rate of interest calculated on a monthly basis and n is loan tenure