Who is Eligible for Secured Business Loans?

Want to avail a loan to grow your business? There are different kinds of loans that cater to the unique financial needs of different institutions. However, there are some standard factors that are instrumental in determining whether or not the applicants are qualified to avail the required funds.

The following are some of the common criteria that determine whether a borrower is qualified to avail the MSME loan or not:
 

1) Existing MSME Enterprise

To avail the funds for an MSME loan borrower needs to classify as a micro, small, or medium company. The borrower must have an already existing micro, small or medium sized company before applying for the financial solutions. For a micro enterprise, it should have an investment up to ₹1 crore and about ₹5 crore turnover. Businesses qualify as small enterprises if they have an investment up to ₹10 crore and about ₹50 crore turnover. Medium enterprises have ₹50 crore investments and turnover of ₹250 crore approximately.

2) Age Limit:

The age limit tends to be between 21 years to 65 years. However, this range may vary based on the lender’s criteria.

3) Citizenship:

The borrower must be an Indian citizen. The borrower must have a legal status in the country, which should be highlighted in any of the proof of identity documentation (Voter ID card, Aadhaar card, PAN card).

4) Credit Score:

Borrowers are expected to showcase a good credit score to establish reliability and their loan reimbursement abilities in the future. Illustrating a high credit score may enable an enterprise to avail the financial solutions at favourable interest rates and repayment terms.

5) Business Age:

The age of an enterprise from its registration date showcases its stability and trustworthiness in the commercial market. It eases the tracking procedure for pinning down the financial history of an enterprise, which is necessary for examining its loan repayment capability. An enterprise that has been established for over 2 to 3 years is preferred for the loan.

6) Registration & Ownership Proof:

The applicant must prove their ownership over the company by producing an Udyam certificate or a labour license. An Udyam certificate helps to determine the business vintage and the credibility of the borrower. A labour license assures that a company adheres to the regulations necessary for the well-being of its workforce.

7) Income Proof:

Bank statements help to evaluate the financial condition of an enterprise. They help to prove the creditworthiness of a company by recording its cash flow and liquidity. Typically, the bank statement of the past six months is preferred. Alternatively, enterprises may have to organize their income tax returns highlighting their profit and loss.

8) Proof of Identity:

Borrowers need to produce an Aadhaar card, driving license, or PAN card as identity proof. For the enterprise, the proof of identity documents include the certificate of incorporation or the business registration certificate.

9) Proof of Address:

The documents necessary to evaluate the address proof of an applicant include electricity bill, Aadhaar Card, or water bill.

10) Turnover:

It is crucial to calculate how quickly the enterprises receive accounts payable from the customers. The higher the turnover is, the more likely it is for customers to make timely payments. However, lower turnover depicts poor services and inventory. The minimum turnover requirements for loan eligibility differ lender to lender as per policy.

11) Collateral:

Certain financial institutions may require collateral to secure the loans. The material assets can be inventory, vehicles, equipment, factory, or property that belongs to the borrower’s and nonmaterial assets can be patents or accounts receivables.

To accelerate the loan application process, the borrower must align with the criteria and submit the necessary documentation. For a trouble-free loan approval process, submit updated documents for the verification stage. By meeting the norms above, an enterprise can portray its loan repayment potential and reliability for availing funds at favourable interest rates and repayment terms.

At Arka, we offer tailored MSME financial solutions that can help companies grow their business in the competitive market. With our Secured business loans, borrowers can expand their business, upgrade their firm’s infrastructure, restock the inventory, and improve the cash flow.