Eligibility Criteria for a ₹1 Crore Business Loan in India
Key factors lenders consider include:
1. Type and Tenure of the Business
- Registered Entity: Must be a sole proprietorship, partnership, private limited company, or LLP.
- Operational History: Minimum 3 years of operation ensures stability.
- Industry Type: Certain industries have specific eligibility criteria based on risk. For instance, manufacturing businesses with steady cash flows are often preferred over high-risk sectors like early-stage startups.
2. Annual Turnover
Eligibility:
- Businesses must showcase a minimum turnover of ₹2 crore annually, depending on the lender.
- Consistent revenue trends over the last two to three years are highly favourable.
Why It Matters: A strong turnover shows repayment ability.
3. Credit Score and Financial Records
Eligibility:
- A credit score of 700 or above is preferred for faster approvals.
- Businesses must maintain clean financial records, including audited financial statements for at least 2-3 years.
Why It Matters: Profitability lowers risk and improves loan terms.
4. Creditworthiness
- Credit Score: Ideally 700+.
- Repayment History: Clean record builds confidence.
- No Defaults: Any history of loan defaults or delayed payments may lead to rejection.
Why It Matters: Credit scores and repayment history show financial discipline and repayment ability.
5. Collateral Requirements
- Secured Loans: Require collateral like property or machinery.
- Unsecured Loans: For businesses with strong financials.
Why It Matters: Collateral lowers lender risk, offering better terms.
Grow your business with our Long Term Business Loan
6. Loan Purpose and Business Plan
- Plan: Outline loan usage (e.g., equipment or working capital).
- Purpose: Demonstrates intent and productive fund use.
Why It Matters: Lenders want assurance that the loan will generate returns and improve business performance.
7. Applicant’s Age and Experience
- Age: Typically, 21–65 years.
- Experience: 3+ years in the industry
Why It Matters: Experience builds lender confidence.
8. Debt-to-Income Ratio (DTI)
- Low Debt: Fewer liabilities improve approval chances.
- Ideal Ratio: Below 40% is optimal.
Why It Matters: A lower DTI shows the borrower can manage new and existing loans.
9. Tax and GST Compliance
- ITR Filings: Submission of income tax returns for at least 2-3 years is mandatory.
- GST Returns: Updated GST returns reflecting accurate sales data build lender confidence.
Why It Matters: Tax compliance shows transparency and legal adherence.
10. Bank Statement and Cash Flow
- Statements: Lenders check 6-12 months of statements for cash flow.
- Consistency: Steady cash flow ensures repayment ability.
- No Overdrafts: Bounced cheques or overdrafts hurt approval chances.
Why It Matters: Bank statements show liquidity and repayment ability.
11. Documentation
- Identity Proof: PAN, Aadhaar, or Voter ID
- Address Proof: Utility bills, registration, or lease
- Financials: Audited P&L, balance sheet, and cash flow (2–3 years)
- Bank Statements: Last 6–12 months
- GST Returns: Past 2–3 years
- Business Proof: Trade license, GST registration, or incorporation certificate
Tips to Enhance Eligibility
- Build a Strong Credit Profile:
* Pay existing debts on time.
* Keep credit utilization below 30%. - Maintain Accurate Financial Records:
* Regularly update financial statements and get them audited. - Optimize Debt Management:
* Pay off smaller liabilities to improve DTI ratio. - Present a Clear Loan Purpose:
* Articulate how the loan will contribute to business growth. - Improve Cash Flow Management:
* Streamline receivables and payables to maintain liquidity.
Conclusion
Meeting eligibility criteria is essential for securing a ₹1 crore business loan. Lenders like Red Fort Capital offer tailored solutions with quick disbursements and flexible terms. A clear plan and accurate documentation boost approval and enable business growth.
Disclaimer: Criteria may vary by lender. Consult for details.
Apply Now for Long Term Business Loan in India
Submit Your Application in Minutes
About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.
