MSME owners, here is how to improve your eligibility for a bigger Business Loan

For Micro, Small, and Medium Enterprises, access to capital is often the difference between stagnation and growth. NBFCs evaluate multiple factors before approving Business Loans. If your eligibility score does not meet their criteria, you may receive a smaller Loan amount or face rejection.

So, how can MSME owners enhance their profile and become eligible for larger Business Loans with better terms?  

MSME Loan eligibility

Before exploring improvement strategies, it is essential to understand the eligibility criteria for MSME Loans:

• The applicant should be less than 22 years old at the time of application and not more than 65 years at maturity.
• If you are applying for the Loan as an individual, you should have been engaged in your current business for at least three years and have five years of business experience.
• The business turnover should be of Rs. 10 lakh per year.
• Your business should also have had consistent profit in the last two years. 

Every lender has its own Business Loan eligibility criteria, but these are the universal factors influencing the Loan amount and interest rate offered.

Strategies to improve your Business Loan eligibility

• Build a decent CIBIL score

Lenders heavily rely on your CIBIL score to assess your financial responsibility. A decent credit score increases your chances of getting a Loan and helps you negotiate for better interest rates.

• Stay strategic

Understand the reason why you want to apply for a Business Loan. Check your financial requirements and your business prospects to finalise a Loan amount.

• Gather documents

Documents are crucial for any Loan application, including a Business Loan application. Try to collect all the documents required based on your lender. If you can provide all your necessary documents, you can avoid various delays and rejections.

Things to do and to avoid while applying for MSME Business Loans

To dos

• Clearly define the purpose of the Loan and mention whether you are taking the Loan for expansion or working capital.
• Use online calculators to check your credibility and apply to NBFCs that offer Loans based on your eligibility.
• Strategise the use of the Loan amount in advance. If you do this beforehand, every other factor, such as repayment strategy and growth prospects, will fall into place.

Not to do

• Avoid applying for MSME Loans at multiple NBFCs. Select a few lenders and strategically place your Loan application.
• Never apply for the Loan without understanding your lender’s Business Loan requirements.
• Do not provide fake financial documents. Small discrepancies in your application and documentation lead to rejections.

Conclusion

As an MSME owner, your Loan eligibility is not fixed. You can build and improve over time. With proper financial discipline, documentation, and a growth strategy, you can unlock access to larger Business Loans that propel your enterprise forward. Instead of waiting until you are desperate for funds, start preparing today.