Are you eligible for a Business loan? Find out know
Here is a question for budding entrepreneurs, how big do you need to be to avail a business loan? Do you need to own a huge factory or have the backing some big clients? Actually, you do not need any of these things to avail a business loan.
There used to be a general thought among people that they might not be able to avail a loan for business unless they are a part of big business. Today, financial institutions, led by NBFCs including Tata Capital, are ready to fund a business’ aspirations. So, be it expanding capacities, adding new capabilities or hiring people, every Indian business can aim to grow big, with a business loan. If your business fulfils just a few conditions, you are eligible for a business loan. Do you have a clue about financial coaching: is it necessary?
The borrower’s age is an important condition. Financial lenders want to lend to people who are not too old or not too young. This means people below 20 years of age are unlikely to get a business loan. If you are very old, like above 70 years of age, the risk in lending is very high. Thus, NBFCs have drawn a reasonable age range for business loan eligibility. For instance, Tata Capital gives loan for business if you are in the age group of 25-65 years. Women entrepreneurs who fall between this can apply for a business loan for women.
Your business age
You may be the person running the enterprise, but it is the business that will receive the funds. Hence, one of the important norms for business loan eligibility is business age. Typically, a loan for business is given to businesses that have been around for three consecutive financial years. A financial year runs from April to March.
Do always remember that business loans are given for existing businesses that have had continuous operations for 3 consecutive years. A business that has not been set up cannot avail a business loan. The longer your business has a track record, the better it is. Lenders know that a business that has been around being a genuine operation and the chances of defaulting on repayments are minimal or next to nothing. Want a business loan?
Cash profit, turnover
When you take a loan, you will need to repay it. The repayment of business loans can only happen if there is profit. A profit will allow you to generate a surplus, while ensuring that you pay your lender. One of the key norms for business loan eligibility is your business should have cash profit in the last two financial years. You can check with your finance person or accountant on this cash profit matter. Ensure that your company’s balance sheet is audited by a registered chartered accountant.
Another important factor to consider is turnover or sales. For instance, one the business loan eligibility norm at Tata Capital is that tour turnover needs to show an upward trend. This means your business has to show some year on year rise in sales. A growing business is a sign of a stable business.