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Eligibility Criteria

The eligibility criterion of the applicant for any business loan varies from lender to lender. The set of Terms and Conditions mentioned as a part of the eligibility criteria also differ. Some of the basic fundamentals are the same. The key issues of the eligibility criteria for any business loan are as follows.


Documentation

Documentation is one of the most important aspects of getting the approval of a business loan. Some of the banks want the documents to be arranged in specific order only. If the documents are not arranged in a specific order as prescribed by the bank authorities there are chances that your application for the loan may be rejected. It is always better to arrange the documents in the manner that is prescribed by the bank. This makes the task of verification easier for those bank officers who check the documents. This increases the chances of the approval of the loan.



Business

Details of the business such as assets, liabilities, history and revenue are an important consideration when applying for loan. The business loan may be needed either to start the business or tide over unfavorable business circumstances or adverse affects of natural calamities such as floods and earthquakes. The nature of business is taken into consideration along with its recent performance trend. This is required because the repayment of the loan depends on the performance of the business. If the business is not worth reviving then there is no use of giving a loan to revive it. Thus, the nature of business is an important aspect and eligibility criteria for granting the business loan.


Collateral

The nature and value of the collateral is one of the most important criteria for getting any business loan. Usually, the value of the collateral differs from lender to lender and also varies from 20 percent to even 40 percent of the loan applied for. Some of the banks require the collateral to be higher so that if the lender defaults, the monetary loss for the bank can be minimized; on the contrary if the case is quite positive and the bank is sure of the repayment of the loan, the bank may need the percentage value of the collateral to be as less as 20 percent.


Financial statements

The financial statements of the business such as the profit and loss account, trading account and the balance sheet show clearly the nature of the business. All the monetary transactions and other features of the business are revealed by the financial statements. The financial statements present a clear and true picture about any business organization. The approval of any business loan is usually dependent on the financial statements. If the financial statements show that the business is not performing well then the chances of approval of business loan are reduced. On the contrary if the inferences of the financial statements such as the fundamental ratios show a positive trend the chances of approval of business loan increase as lot.


Experience

If you are new to the business and the market it is obvious that the chances of failure are greater than the chances of success. Experience makes a man perfect. More the experience more is the chance of approval of the business loan. While giving a green signal for approval of the business loan the bank officials take into consideration the experience of both the board of directors and the business. If the business is new then the experience of the board of directors is taken into consideration. On the other hand, if the business is old then the working of the management is taken into consideration. In case of old businesses the need of business loan is closely studied.


Traditional proofs

Traditional proofs such as the papers of income tax returns are one of the main documents for approval of any business loan. The income tax returns show the performance of the business. It is one of the most concrete proofs for the income of the business. When you are the sitting member of the board of directors of a company be sure the tax returns of individual members of the board is also taken into consideration. This is an important criterion for approval of any business loan. Details about the liquid money assets have a positive effect on the approval of the business loan.

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