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Tata Capital > Blog > Loan for Business > Business Loan Eligibility Criteria in India: Check and Improve Yours

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Business Loan Eligibility Criteria in India: Check and Improve Yours

Business Loan Eligibility Criteria in India: Check and Improve Yours

Securing the right business loan is a game-changer when starting a business or expanding an existing one. These unsecured loans allow you to finance business needs ranging from procuring new inventory to paying employee salaries.

However, the first step is to conduct a comprehensive business loan eligibility check before applying for a business loan.

To be eligible for a business loan, your business must meet specific criteria set by the lender. Here we provide you with a list to check eligibility for business loans.

Business Loan Eligibility Criteria in India

Before a lender decides to approve your loan, they check your ability to repay it. They do this through a thorough business loan eligibility check. Understanding what factors are vital to your lender’s decision can help you boost your chances of securing a business loan.

#1 Age requirement

This criterion of business loan eligibility checks if you are of age to enter into a loan agreement and repay it in the future. There is an upper and lower limit set on the age requirement. At the time of your loan application, you should be at least 21 years old and below 65 years at the time of your last loan instalment.

To check eligibility for business loans with respect to this criterion, your lender would require you to submit a document as proof of age. This could be your Aadhar card, Voter ID, Birth Certificate, or PAN Card.

#2 Business profitability

The profitability of your business tells the lender if you generate enough revenue to support loan repayments. A business’s financial strength is an essential consideration for lenders when checking the business loan eligibility for a new business.

You will have to submit proof of income to prove that your business is profitable. This includes documents such as Income Tax Returns and Computation of Income, tax audit reports, profit-loss statements, and balance sheets. The documents submitted must pertain to the previous two fiscal years, and all documents must be verified, signed, and sealed by a registered chartered accountant.

#3 Business stability

Next, to successfully clear a business loan eligibility check, you must be able to establish the stability of your business. Firstly, the longer a business has operated, the more stable lenders consider it to be, as this speaks to your business’s longevity and resilience.

Business stability is also a reflection of your business’s ability to withstand dynamic market conditions. Lenders may judge this through various financial ratios that convey the health of a business.

To determine if your business would qualify for an eligibility check, you can verify if your current ratio, debt to equity ratio etc are favourable. Lenders may also analyse efficiency ratios regarding turnover, inventory-to-asset ratios, and collection periods to check eligibility for business loans.

#4 Bank balance

Your bank balance is another indicator of your financial stability and business profitability that lenders use to conduct a business loan eligibility check. To determine if your bank balance makes you eligible for a business loan, verify if you’ve had a healthy bank balance for at least six months.

A healthy bank balance tells your lender that you can repay the loan and that your business has liquidity and a positive cash flow to support your operations.

To facilitate a business loan eligibility check, you must submit bank statements for the last six months as part of the application process.

#5 Credit score

Your credit score tells the lender if you are a trustworthy loan applicant. This crucial metric is a reflection of your creditworthiness and credit history. A higher credit score means a higher chance of securing a loan.

When it comes to a business loan, lenders evaluate both personal and business credit scores. A credit score above 650 boosts your loan eligibility. It also makes you eligible for higher loan amounts and more competitive interest rates.

#6 Business Plan

Lenders consider your business’s potential to achieve success as part of the business loan approval process. The best way to inform your lenders of your business’s credibility is through a well-prepared business plan.

This is particularly crucial regarding business loan eligibility for new businesses, as the business plan demonstrates your vision, strategies for the future, competitive advantage, and professional commitment.

To ensure you qualify for the business loan, create a robust business plan that highlights your business’s profitability and longevity. This will help convince the lender of your business loan eligibility checks.

How to Check Your Credit Score for Business Loan Eligibility

You can check your credit score for free in just a few steps on the Tata Capital website or our Moneyfy app. Here’s what to do.

1. To register as a new customer, enter your details, such as your name, email, mobile number, Aadhar and PAN numbers. You will receive a one-time password (OTP) on your registered contact. Your credit score will be calculated once you enter the OTP.

2. If you’re an existing customer, log in with your registered mobile number. Generate and submit the OTP to check your credit score.

Minimum Turnover and Vintage Required for Business Loan Approval

When you apply for a business loan, lenders mainly want reassurance that your business is stable enough to repay what you borrow. That’s where turnover and business vintage come in. They’re core parts of business loan eligibility criteria India.

  • As per Tata Capital, your business should be operational for at least two years before applying.
  • Your turnover should show an upward or stable trend, indicating healthy growth rather than fluctuations.

For many lenders, profitability matters too, as it signals repayment capacity. In case of high-ticket loans, a proven operating history reduces risk. In short, the longer and more consistently your business has performed, the stronger your case looks under standard business loan eligibility criteria India.

Documents Required for Business Loan Application in India

Before you apply, it helps to get your paperwork sorted. Lenders assess documents to validate your identity, business legitimacy and financial health. If you’re applying for a business loan with Tata Capital, make sure you have these documents on hand:

  • KYC documents such as valid identity and address proof of the borrower, including PAN card, voter ID, passport, or driving licence
  • Business proof documents, like the business registration certificate, GST registration, trade licence, or a certified partnership deed or proprietorship declaration
  • Income Tax Returns and computation of income for the last two financial years
  • Audited financial statements, along with the applicable tax audit report, for the previous two years
  • Profit and Loss account and balance sheet, duly audited by a Chartered Accountant, for the last two years
  • Current account statements of the business covering the most recent six months
  • GST returns or statements for the last six months to reflect sales and tax compliance

Proper documentation plays a key role in new business loan eligibility and ensures smoother compliance with business loan eligibility criteria India during lender assessment.

Common Reasons for Business Loan Rejection and How to Avoid Them

Loan rejection can feel frustrating, but most reasons are avoidable once you know what lenders look for. Understanding this puts you back in control.

  • Inconsistent turnover or weak profitability raises repayment concerns
  • Low or irregular credit scores reduce lender confidence
  • Incomplete or incorrect documentation delays verification
  • Short business vintage affecting new business loan eligibility
  • Existing high debt obligations

To avoid rejection, keep your finances clean, file returns on time, maintain a healthy credit score and double-check documents before applying. When lenders assess business loan eligibility criteria India, they focus less on perfection and more on how clearly and consistently your business story adds up.

Conclusion

Here’s what you must do to check all business loan eligibility checkboxes.

1. Maintain and constantly improve your credit score by repaying your loans in time, maintaining a diverse credit portfolio, and keeping a low credit card utilisation rate.

2. Optimise your cash flow and expenditure to maintain a favourable and healthy bank balance over time.

3. File your income tax returns and computation of income on time.

4. Create a comprehensive business plan showcasing your business’s growth potential and profitability.

5. Apply for a business loan with a financial institution that offers competitive interest rates, a hassle-free business loan application process and quick approvals like Tata Capital.

Whether you need a business loan to meet day-to-day expenses or to finance the expansion of operations, all you have to do is apply with Tata Capital.

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FAQs

Who is eligible to apply for a business loan in India?

Self-employed owners, proprietors, LLPs, partnerships and private companies meeting business loan eligibility criteria India can apply, subject to age and financial performance of business.

What is the minimum turnover or profit required for business loan eligibility?

Most lenders want an upward-trend turnover and profitability; Tata Capital expects profit and a healthy business trend for meeting its business loan eligibility.

How long should my business be operational to qualify for a loan?

Most lenders want 2+ years of operation; Tata Capital’s business loan eligibility criteria India lists minimum two-year business vintage.

Can startups or new businesses qualify for business loans?

Yes, startups can qualify if they meet new business loan eligibility requirements such as a strong plan, credit score, and projected cash flows.

Does credit score impact business loan eligibility?

Yes, a good credit score is a key business loan eligibility criterion and helps secure better terms. Generally, the higher the credit score, the more chances you have of getting a business loan. Tata Capital often expects 675+.

What are the most common reasons for business loan rejection?

Business loan rejection often stems from low credit score, weak turnover, insufficient profitability, inadequate documents, or weak new business loan eligibility profile.

Are collateral-free business loans available in India?

Yes, many lenders including Tata Capital offer 100% collateral-free business loans when their business loan eligibility criteria are fulfilled.

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