Top 5 Factors That Influence Your Business Loan Eligibility | Rupeezo

By Rupeezo | 31st, Mar, 2023

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When you run a business, there is an incessant need for funds to meet the operational cost of the business and to combat unexpected financial emergencies.

Therefore, a business needs to always be loan-ready if it wants to get quick funds without any difficulty.

Although, the profits from your business are supposed to provide for your business and financial needs. However, due to the low-revenue periods, it becomes hard for the business to survive.

In this scenario, business loans are the only hope to get some funds. But before you outrightly apply for a business loan, make sure you check your business loan eligibility.

So, to help ensure that you conform to the new business loan eligibility and get a business loan without any fuss, below are some factors to consider.

Your Business Line

Know your business type first, before you decide for getting a business loan. The type of business is a major factor contributing to your loan eligibility. A well-structured business with strong financial records and a good cash flow has a better chance of getting a business than a startup with no financial statements to show. Businesses with low profits or unsteady cash flow seem riskier for the lenders as they fear the default on payment. So, the lenders gauge how financially your business sound in order to decide the creditworthiness of your business. 

If you are a startup with limited financial records or fall into the category of a risky business, then it may be hard for you to get a business loan. Therefore, check your startup business loan eligibility and work on improving the cash flow and adding more financial data, before applying for a business loan. Maintain a legitimate and brief business plan that you can show to the lenders and gain their trust in your ability to run a successful business. All of it will affect your loan eligibility and get you a business loan.

Profits and Cash Flow

Another factor that determines your loan eligibility for business is the revenue and cash flow of your business. Lenders and financial institutions want to know the revenue potential of your business so that they can get an idea about credit capacity. So, it is crucial that you generate considerable revenue from your business as it affects your startup business loan eligibility. On the other hand, if you have little to no profits, then there is a high chance that you won’t qualify for a loan. Lenders check your financial statements to find out how profitable or successful your business is.

However, if you have low profits, there are still some financial institutions offering business loans with bad credit or low profits. High-profit potential creates a positive impact on the lender as it reflects the repayment capacity of the business.

Also, a positive and steady cash flow for your business matters. The consistent cash flow shows that the business can meet its obligations and funds its operating activities. As a result, the business is likely to generate profit and therefore, the lender can trust them with the loan repayment. So, before you apply for a business loan, make sure you are eligible for the loan by making plans to improve the cash flow of your business.

Check your business loan eligibility here!

Years of Operation

The years of operation of your business are another important determiner of your business loan eligibility. The age of your business is a crucial factor considered by the lender before they pass your loan applications. A business operating for many years has more chances of getting a business loan approved than a business that just came into existence. Ideally, the business has to be at least a year or two old in order to get approved for a loan.

However, that does not mean that businesses with lesser operational years should forget getting a business loan. If you have strong financial records, a good cash flow, ITRs, balance sheets, and major profits, then these will serve as a great testament to your business loan eligibility. And eventually, most lenders will be willing to grant you a loan despite the small age of your business.

Credit Score and History

The credit score of your business is amongst the strongest factor that determines your new business loan eligibility. Before granting you a loan, the lenders would like to explore your credit history to analyze your repayment behavior. Especially, if you are looking for a small business loan, then having a good credit history is crucial to get the loan approved. A good credit score of above 750 and a sound credit history is most likely to help you lend a loan of your desired amount. Even if you have a low credit score, you can work on improving it by settling your debts or paying off the pending bills.

However, a low credit score does not bar you from taking a loan, as there are lenders that offer loans to businesses even with poor credit scores. But if you want to make your business highly eligible for a loan, then have a robust credit history along with a high credit score. This way you will be able to negotiate with the lender and get the needed loan amount along with low-interest rates.

Pledging a Collateral

Offering collateral to the lender is one sure-shot way to confirm your business loan eligibility. Pledging collateral mitigates the repayment default risk, and thus, lenders are more willing to offer a loan if you provide collateral. Even if you don’t qualify perfectly on the other loan requirements, pledging collateral can increase your new business loan eligibility. to a great extent. However, if you do not have collateral to pledge, then you can still find loans as many lenders offer unsecured loans that do not require collateral.  

If you want to get a pre-approved business loan, then connect with the team Rupeezo.

We are one big loan aggregator platform linked with various financial institutions around India. We aim to provide our customers with the best deals for a business loan so they can get their desired loan without much struggle.

To know more about business loan offers, check out services now!