5 Eligibility Factors One Should Consider for An MSME Loan A

According to TransUnion CIBIL, the resurgence of the MSME credit spike promises economic recovery in India at a rapid pace. Commercial lending in the country is clocking a growth rate of 2.1% y-o-y. The probable reason for such a surge is the implementation of various schemes to boost small businesses.

An individual must look at the eligibility criteria before filling the MSME loan application form.

5 eligibility requirements for an MSME loan application

Different lenders have set certain MSME loan eligibility criteria for the borrowers. Below are the five focal criteria-

  1. Credit score 

Lending organizations determine credit scores to assess an individual’s creditworthiness and the risk involved. However, for new applicants planning to start a business, they have to provide their credit reports to evaluate their repayment behavior.

There is a high chance of application rejection if the score is below 750. In that case, one must adopt significant measures to improve your credit score.

  1. Business vintage

It is a vital checkpoint to assess a prospective borrower’s eligibility. The enterprise should have a minimum business record of 3 years. Documents like trade license, registration certificate, IT returns, cash flow etc., submitted with MSME loan application form.  

  1. Nature of the business

MSME loan eligibility criteria are classified according to the nature of an organisation. They are:

  • Self-employed professionals, including CAs, engineers, allopathic doctors, architects, can apply for the debt.

  • Retailers, traders, suppliers, manufacturers, service providers who fall under the self-employed non-professionals category can avail this product.

  • Entities like partnerships, limited companies, limited liabilities associations and like ones fall under this type.

  1. Annual turnover

A business loan is a tricky debt instrument. Lenders decide the repayment capacity of a borrower by looking at the company’s income. Therefore, entrepreneurs have to mention their annual turnover in the MSME loan application form. 

  1. Documents required

Business owners have to submit some essential documents required to complete the loan processing. They are as follow-

  • KYC

  • PAN card both personal and company’s

  • Proof of ownership

Financial documents required:

  • Bank statement of at least 1 year

  • Business registration certificate

  • Partnership deed statement (if any)

  • Profit and Loss detail of last 2 years

  • Sales tax returns documents

  • Audited balance sheet

  • GST certificate

  • Existing loan details, if any

Other than these MSME loan eligibility criteria, you may have to submit some additional documents as per your lender’s requirement for speedy approval of the application.

Takeaways

  1. Loan providers strive to ensure quick processing and disbursal of funds determining the urgency of finance.

  2. To reduce the hassle of application, reputed loan providers offer online applicationss with customized plans based on borrowing documents.

  3. An individual can opt for a convenient repayment tenor and utilise foreclosure facilities to avoid extra cost.

  4. Borrowers can assess tools like the business loan EMI calculator to deduce the EMI amounts and choose a deal that fits them best.

Reputed NBFCs like Bajaj Finserv extends attractive pre-approved offers on products like business loan, personal loan, etc., for a streamlined application process. To check your pre-approved offer instantly, submit your name and contact details.

  1. The Government of India has introduced several schemes through various lending corporations to extend help for the indigenous industry. One of them is the Pradhan Mantri Mudra Yojana, a collateral-free scheme that provides funds up to Rs.10 lakh.

These are the eligibility checklist required to fill an MSME loan application form. Assess your needs cautiously and opt for the right provider to effectively manage an enterprise in the long run.

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  1. author
    27 Aug 2019
    Tomas Mandy

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    1. author
      27 Aug 2019
      Britney Millner

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  2. author
    27 Aug 2019
    Simon Downey

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