Small and Medium-Sized Enterprises (SMEs) face challenges when they want to apply for a business loan. Many of the eligibility criteria are structured around business loans for large enterprises, and SMEs find it frustrating to acquire a business loan. This is understandable when you put the picture into the context of risk. Financial institutions wish to fund developing companies, but they are apprehensive about the risk that comes with investment. Therefore, a common trend is to see SMEs struggling with the capital to fund their new enterprises. Most developing companies in developing nations face this.
Business Loan Eligibility Criteria
Business loan eligibility criteria have to be met for you to apply for a business loan. These are predetermined conditions by banking and financial institutions that are, by and large, common for business loans across institutions in India. At Finserv MARKETS, you can get a good grip of eligibility criteria for a business loan in India, and these are mentioned here:
- Your age should be in the range of 25 – 65 years.
- You should be self-employed.
- Your business should have a vintage of at least 3 years.
- You must show income tax returns of at least a year.
On Finserv MARKETS, you can calculate the amount of loan you are eligible for by using the “Loan Calculator” service.
Challenges Associated with Business Loan Eligibility
Now that you are aware of eligibility criteria, you will understand the factors that result in business loan eligibility criteria being challenging in India. The key challenges that MSMEs (Micro, Small, and Medium Enterprises) face are mentioned below:
Age Factors –
To obtain a business loan, you have to fulfill certain age criteria. A business loan is an unsecured loan, and for most of these, in India, the age range requirement for business loans is from 25 years to 65 years. If your age falls below the minimum or above the maximum age, you cannot get a loan. Although the gap is large, several people below 25 and above 65 years can be productive at a business.
Secured Loan Stability –
Another limitation that borrowers face while taking a loan is that the business has been stable for at least 3 years. To get a personal loan, your business should have been up and running before you take a loan. During this period, your documentation should precisely reflect business income, plus expenses. Additionally, you have to show a profit as steady development. If you have had fluctuating business operations, these may act as impediments to your getting a loan. Younger businesses and ones that got off to a wobbly start may be adversely affected by this criteria.
Creditworthiness –
A challenge that most self-employed people face while meeting eligibility criteria for a new business loan is the aspect of credit rating. If your credit rating doesn’t meet finance companies’ standards, you won’t get a business loan. Problems also arise if you are in a partnership and one partner has a bad credit score.
Wrapping it Up
A solution to these challenges of eligibility criteria that businesses face while opting for a business loan is to seek alternative forms of borrowing. Online business loans are available through many channels, not least of which are banks, and you can find a selection of lenders at Finserv MARKETS. Here, you can find banks and financial institutions that are ideally suited to giving you business loans, thanks to the relaxed policies of some banks and finance companies.
