SME (Small and Medium-sized Enterprise) loan is one of the best ways for business owners to acquire funds for managing their business expenses. However, just like all the other types of loans, these loans have certain eligibility requirements. Read this post to know some of the most important criteria to be eligible for SME loans.
For small business owners, the need for immediate funding could arise at any time. From taking advantage of a business opportunity, investing in new equipment, hiring new talent, to business expansion, there are several reasons why a small business owner might need additional funding. To help such business owners, many lenders now offer SME loans.
With attractive interest rates, flexible repayment tenure, and easy monthly repayments, such loans are an excellent choice for small business. However, to get the SME loan application approved, it is necessary for the business owners to meet a few eligibility requirements of the lender.
- Business Operation History-One of the most important considerations for SME loan lenders is the operation history of your business. The lender would like to make sure that you have been in the business for a considerable amount of time and would not find it difficult to repay the loan on time. Most lenders generally require you to have a business operation history of 2-5 years.
- Turnover-You willbe able to repay the loan only if your business is making considerable profits. For this, the lender would also like to go through the financial history of your business. In most cases, you shouldn’t find it difficult to get an SME loan if your small business is making annual profits of two to four lakhs. The loan amount also plays a crucial role in deciding the minimum required business profit.
- Business Plan-The next essential requirement is a solid business plan. The bank would like to know what you'd want to do with the borrowed money and how it can help you earn more profits or improve your business operations. Your business plan should have financialsense with sound capital estimates, operations outflow, equipment, and assets. It is only after the lender is satisfied with your business plan that your loan application will be approved.
- Age of Applicant-Apart from factors related to the business, there are a few things that the lender would like to know about the applicant. For instance, the age of the applicant is a major consideration. Lenders prefer giving loans to young individuals as they are considered to have more time to work and can easily repay the loan. In most cases, lenders prefer SME loan applicants to be in the range of 25 to 65 years.
- Credit Score-Just as you’d not like to lend money to a friend or relative who never repays on time, the lenders to avoid giving money to people who have a bad credit history. They do so by checking your credit score. Credit bureaus like CIBIL maintain the credit history of individuals. This credit history is used by lenders to decide whether borrowers are eligible for small business loans or not
Managing Business Expenses with SME Loans
Getting an SME loan is now easier than ever. Many of the lenders now also allow you to apply online. The only thing that you do need to take care is whether you meet the eligibility requirements of the lender.
In most cases, the factors listed in this post are the ones that most lenders are greatly concerned about. To avoid getting your SME loan application rejected, make sure that you do check the eligibility requirements of the lender from whom you’d like to borrow and ensure that you do meet them.
In case of any queries, do not mind getting in touch with the lender to get them resolved and apply confidently.