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How to Find Out If You Are Eligible For A Small Business Loan?

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The majority of the youth today are showing interest in independent businesses. A main leading cause behind this is the larger shift of the individuals today towards building their businesses. People are no longer interested in the boring 9-5 jobs where they have to deal with the exhaustive circle of never-ending workload. They now look for innovative career paths where they are the master of their own will and are not answerable to any bosses.

As a consequence, to this, there has been tremendous growth in the small business sector in the country. So much so, this sector now contributes a hefty 40% of the nation’s GDP. Small businesses now make up about 45% of the total industrial production in India. Needless to say, small businesses have now become a promising career choice for many people.

Supporting the growth of small-scale business in the country, the Government has also made some leaps to provide aid to the small business owners in the form of investment plans, insurance covers, and lastly loans. 

What is a Small Business Loan?

A Small Business Loan essentially refers to monetary support provided to an individual who is looking to start his/her business to set up the initial part of the business under a specified period by a lender. These types of loans are a product of strategies made by the Government to help the upwards trajectory of small-scale independent businesses and reduce unemployment.

The chief authorities to lend a business loan are banks and NBFCs. These organizations offer custom small business loans that can be selected by the individual as per his/her needs. As there is a growing market of small businesses in the country, each business owner is trying to outsmart the other by bringing in newer techniques or modern touches to the business. All these accommodations require a bulk load of finances in one go, and hence, a business loan shall cater to this prospective of business owner in times of need.

What are the advantages of a Small Business Loan?

A small business loan acts as the wind beneath your business’s wings which helps it to make a swifter take-off. The number 1 thing on the list of priorities while starting any business is the financial budget and requirements. Any successful business starts as a small business that requires an initial capital investment. What if an individual has both the talent and the desire to start his/her own business, but the only that keeps them from doing so is lack of finance? A business loan comes to the individual’s rescue in times like these.

The Small Business Loan provides benefits such as-

  • Providing initial capital investments
  • Quicker pooling of a large amount of money
  • It becomes easier for the business owner to achieve initial goals within a short time
  • A safety cushion in times of financial crisis

Small Business Loan eligibility

With more and more people realizing the advantages of a Small Business Loan, both primary as well as secondary lenders have started making alterations to the nominal business loans in a sense that it fits the business owner’s goals in a better way.

However, with some good modifications, there also comes certain new rules and regulations. One such regulation is the business loan eligibility. Several loan providers have incorporated an eligibility criterion which an individual has to fulfill if he/she wishes to borrow the money. Hence, from a business owner’s perspective, it is important to note the eligibility requirement of a particular scheme before one applies for it.

How does one check eligibility for Small Business Loans?

There are a variety of Small Business Loans available for an individual to choose from. The business owner must read the credentials of business loan eligibility which are demanded beforehand; otherwise he/she may not be able to qualify for the loan.

Here are the guidelines small business loan eligibility criteria of the different loan schemes:

The short-term Small Business Loan

This type of business loan comprises a loan period of up to 2 years which can function as a source of initial investment capital or enhancing finance for the business. This type of loan is available for those individuals:

  • Who has completed a minimum of 3 years of business operation time?
  • Who has a turnover of Rs 1 Lakh ore higher in their audit finances?

Proprietor Loan for Small Business

Such types of loans can be availed by individuals who run business-like trading, manufacturing, retailing, or service provides. The business loan eligibility criteria is as follows:

  • Applicants should have a business with an operating period of at least 1 year.
  • The applicant should have a business turnover of Rs 90,000 or higher.

Small Business Inventory Finance

Popularly called ‘pay later’, this type of business loan qualifies as a bank overdraft where an individual can withdraw or deposit funds anytime during the policy period. The maximum amount that can be withdrawn depends upon the borrowing limit set for a particular loan. Inventory finances are ideal for businesses that operate with bulk orders at one time. An individual may apply for inventory finance if:

  • He/she runs a business which has completed an operation period of 1 year
  • The supplier who is associated with the business has been doing so for a minimum of 3 months.

Small Business Franchise finance

This is a modern business loan where the availability of loans is dependent upon the owner’s or business’s reputation in the market. This is a good form of capital growth for businesses with high brand value, for example- businesses in lifestyle, education, wellness and beauty, sports, entertainment, dealerships or retailers, etc. The eligibility criterion for franchise finance include:

  • Applicants should have a business with an operating period of at least 2 years.
  • The applicant should have a business turnover of Rs 12 Lakhs or higher.

Online Small Business Finance

These are the loans that cater to the needs of small retail businesses that work through e-commerce websites. An individual can apply for such loan if-

  • He/she runs a business which has completed an operation period of 1 year
  • He/she has had a working period of at least six months on the e-commerce website.
  • The return from sales of the small business should be Rs 75,000 or more for one quadrant of the financial year.

The individual can also cross-check the business loan eligibility criteria from the official website of the Small Business loan provider as they provide an eligibility checker for every loan. Another feature to note is that business loan is only available for specific enterprises namely-

  • A company with limited liability
  • Private limited company
  • Partner Firms
  • Proprietors/Self-employed individuals
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