What are the eligibility requirements for a working capital loan?

The eligibility criteria for a working capital loan can vary depending on the lender, but here are some common requirements:

1. Applicant’s Age: The borrower should be at least 21 years old when applying for the loan and should not be older than 65 years upon loan maturity.

2. Nature of Business: Eligibility depends on the nature of the business. It applies to individuals, proprietors, partnership firms, private or public companies, retailers, traders, or any other business owners engaged in service, manufacturing, or trading sectors that require consistent cash flow for working capital.

3. Business Turnover: The business turnover amount varies based on the chosen lending bank. For instance, if you apply for a Working Capital Loan from HDFC Bank, the loan segments are divided into annual turnover below Rs. 7.5 crore and annual turnover above Rs. 7.5 crore.

4. Business Vintage: Your business should have been operational for the past 2 years, with profitable financial records.

5. Business Experience: Most banks require a minimum of 2 years of the same business at the current location.

6. Financial History: A stable and credible financial history with consistent profits over the years is essential.

7. Source of Income: Your business income or investment income qualifies as your source of income.

8. CIBIL Score: If it’s a company, the business’s CIBIL Score should be 700 or above. For sole proprietors, entrepreneurs, or self-employed professionals, their personal score matters.

9. Financial Capability: The business’s financial capability and the promoter’s ability to repay the loan are critical factors. Profit and loss statements, balance sheets, and income tax returns demonstrate stability and profitability.

10. Creditworthiness: No loan defaults in the past contribute to creditworthiness.

11. Ownership or Collateral Worthiness: Ownership of property (residence, office, shop, godown) is considered by banks.

Remember that these criteria may vary slightly among different lenders, so it’s essential to check with the specific institution you’re interested in.

Others Also Read:

• What is the interest rate for a working capital loan?

• How much can I borrow with a working capital loan?

Categories: Business Capital Loans, Business Loan, Collateral, Default On a Business Loan, Repayment terms, Requirements.