Business loan

How to qualify for a small business loan in 5 steps



The Startup India program was launched by the Indian government in 2015 with the aim of facilitating, financing and managing start-ups, as well as small businesses across the country. Small business owners across the country often struggle to obtain adequate financing, and the process can be tedious if you are not fully aware of the lender’s requirements and terms.

Below are five easy-to-follow steps to ensure you secure a online small business loan:

  • Strengthen both business and personal credit score: Your personal credit score is often used by lenders to assess your ability to repay your loan, credit card and mortgage dues. A good personal credit rating, backed by timely repayments, is a strong indicator of your ability to manage your debts and plays an important role in helping lenders decide whether or not to finance your business. In addition to personal credit scores, well-established companies also boast of business credit scores, accredited by agencies like Equifax, Experian, and Dun & Bradstreet, to name a few. By ensuring transparency and accountability in all your business transactions, you can then qualify for SBA (government-backed) loans, as well as secure financing from banks and other lenders.
  • Know the criteria of lenders: Most lenders in the market are looking to assess your business’s credit ratings, number of years in operation, and revenue and profits before they can agree to lend you money. To get a small business loan online from government lenders, you must meet past non-default standards, and your business model must meet the standards specified by these agencies. To be eligible for loans from banking institutions, good credit scores (personal and professional), income and profit streams and proper documentation are a must.
  • Keep financial and legal documentation handy: To obtain funding under the India Startup Programyou should keep a list of documents handy, including – personal and business tax returns for the last 2 years, bank statements, proof of your business address, proof of residential address, the PAN card, the AADHAR card, business and commercial licenses, and Articles of incorporation.
  • Create a business plan: To get a small business loan online, every potential lender in the market will ask you to provide them with a bulletproof business plan, to assess how you intend to use their money to grow your business and whether you will repay their loan. A solid business plan must necessarily include a description of your company’s mission, a description of the product/service, information relating to senior management, an in-depth analysis of the industry, plans relating to the factory and the facilities, details of current and projected finances, a SWOT analysisand your marketing strategy.

Collateral: If you want to get a small business loan online in India, you are legally required to submit collateral with your loan application. This can take the form of real estate, plant, inventory or machinery. A collateral requirement is made so that if you fail to repay your loan, the lender can cover their losses. If by any chance your business can afford to offer collateral, you can also choose to opt for an unsecured loan, one that eliminates the need for collateral.