What is the Eligibility Criteria for SME Loans?

Loans that meet the financial needs of the Small and Medium Enterprise (SME) sector are referred to as SME loans. This sector helps to industrialize underdeveloped and rural areas and offers substantial employment opportunities at comparatively low capital expenditures. Due to their significant contributions to domestic production, increases in export profits, and operational flexibility, SMEs are essential to the nation’s development.

Many prestigious financial institutions in India now provide SME loans to meet the financial demands of Small and Medium Enterprises (SMEs). For these business loans, the lenders also have qualifying conditions, just as for all other forms of loans. Listed below are some of the most crucial eligibility conditions you should be aware of if you’re seeking for small business loans:

Business Type

These loans are available to everyone, including self-employed non-professionals (SENPs) like manufacturers, retailers, traders, service providers, and business owners. Partnerships, private limited corporations, and limited liability partnerships are examples of business entities that may apply for SME loans

Business Turnover

Depending on the lender and loan type you choose, the business turnover criteria can vary greatly. For instance, to qualify for a loan, the organization must have a minimum annual turnover of INR 5 Lakh. Similarly, if your company’s yearly revenue exceeds INR 20 Lakh, an unsecured business loan would not be accepted.

Business Experience

While there are currently loans available for new businesses as well, the majority of business loans are only authorized if the firm owner has extensive business management expertise. If you’re seeking small business loans, the lender will at the very least demand that you have been operating your current business for at least 2-3 years and have been in the industry for at least 5 years. You can also get a better business loan interest rate if you have vast experience in running your business.

Business Profitability

No lender wants to provide a loan to a company entity that is experiencing losses because, this greatly raises the likelihood of a loan default. As a result, the majority of top lenders will only grant SME loans if the company has been profitable for at least two to three years.

Age and Credit Score

Only people who are at least 21 years old may apply for a bank loan for a business. When the loan is due, the applicant’s age cannot be more than 65. For loan acceptance, the lender will also take the borrower’s credit score into account. If your credit score is between 650 and 700, it will typically be simpler to obtain approval for the loan.

Financial Feasibility

Future financial estimates for the following three to five years must be included in your business plan. You should make the estimates using industry standards. You can also be required to adhere to specific formats that help lenders in assessing the viability of your company on the financial front.

These loans can be customized to meet the individual demands of each borrower and are offered at low-interest rates. To ensure that you can readily repay the loan, lenders also provide a variety of repayment options.

Chola SME Loans are business loans created exclusively for Small and Medium Enterprises to grow and diversify their business. Chola offers a range of financial solutions to meet your specific short-term or long-term funding and business expansion requirements.

Chola provides Small and Medium Enterprises Loans of various types such as Secured Term loans, Supply Chain Finance, Equipment Finance, Loan Against Shares, and ESOP Financing ranging from INR 10 Lakh to INR 20 Crore. Calculate your EMI and check loan eligibility now with the Chola term loan eligibility calculator.