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Tata Capital > Blog > Loan for Business > Factors That Determine Your Approved Business Loan Amount

Loan for Business

Factors That Determine Your Approved Business Loan Amount

Factors That Determine Your Approved Business Loan Amount

Business loans are a saviour in times of financial distress. Not only for when operations aren't lean enough to keep things running smoothly, but also when you want to scale your business. The only sad part? You don't always get the amount you want.

Financial institutions check a number of factors before approving a loan amount for a business, no matter how big or small. What are these? Let's find out.

1. Credit score

Your company's CIBIL or credit score is the first thing lenders check to decide the loan amount you can borrow. A high credit score will convey that you are a low-risk borrower who keeps their credit under check. As a result, you will be eligible for a higher loan amount, even a lower business loan interest rate.

Some of the ways of maintaining a high business credit score are:

  • Maintain a positive cash flow
  • Keeping your credit report updated
  • Balance credit utilisation ratio
  • Pay off balances more than once a month
  • Keep your old business credit cards

Additional Read -Top Things to Consider in Order to Get Your Business Loan Approved In 1 Go

2. Business plan

On average, business loan amounts arehigher for borrowers who have a solid business plan in place. A business plan should clearly state:

  • Past years’ revenue
  • Sales strategies
  • Demand for your product
  • Steps taken to survive the competitive landscape
  • Forecasted sales and profits for the next 3-5 years

These, among other information, will help lenders assess the profitability of your business and extend a loan offer. If the lender finds your business plan viable and sustainable, they wouldn’t mind sanctioning a higher loan amount.

3. Financial performance

Lenders will assess the financial health and standing of your business using financial statements and balance sheets. They'll closely inspect ratios such as liquidity, debt-to-equity, and operating margin, including business cash flow, to come up with a loan offer.

Your cash flow will help determine the money available to service your loan after other expenditures have been covered. So, a positive cash flow will assure the lender of your repayment capability. Naturally, your average small business loan amount will be higher.

4. Insurance information

In order to reduce the risk of lending, lenders also look at the life insurance details of the company's owners. On the occasion of the unfortunate demise of the company’s owner, the lender will use the insurance money to close the loan. So, the higher the insurance coverage, the higher the loan principal the lender may be willing to sanction.

Additional Read - Top Things Lender Considers While Sanctioning a Business Loan


If you’re in need of a loan for your business, you can choose a loan principal between Rs. 5 lakhs to Rs. 75 lakhs from Tata Capital. We offer loans without collateral and affordable interest rates starting at just 19%!

Our EMI plans are also customisable to make your repayment journey comfortable. To check whether the loan amount you’ve opted for is affordable, you can use our online business loan EMI calculator. Remember, tough times don't last, but tough businesses do!

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