Whenever an SME business wants to get business loans, it can get very frustrating because most of the qualities required to get the loan are structured with big businesses in mind. This is understandable because financial institutions would like to plug into developing companies but they do not want to bear a large proportion of the risk that comes with this move. It is, therefore, a common trend that SME businesses in India have limited options when it comes to capital financing. However, this is not only particular to India as developing countries also face these impediments. Some of the eligibility challenges facing these businesses include:
Age Factors for MSME Loans
To get a business loan, you must first satisfy the age requirements. For most unsecured loans, the age limit is between twenty-one and sixty-five years. If you are below or above these ages respectively, you cannot get a loan. This is one of the reasons why the younger and older populace is unable to engage in productive activities since they have limited options even if they try setting up a business.
Business Stability for Secured Loans
The stability of your business does not only count when it comes to an unsecured loan. It also comes into play in secured loans. In order to get an SME business loan in India, your business has to have been in operation for at least two years. During this time, your books of accounts should accurately reflect income and expenses. In addition to this, your profits need to have a steady trend. Profits that fluctuate over time can be an impediment to your loan application. This locks out younger businesses as well as those that might have had a shaky start. Platforms such as Loan Frame have helped to turn this around for younger businesses. There are ways to revamp your application in order to overcome this hurdle.
Another eligibility challenge when it comes to getting business loans is the credit rating. If your credit rating is low, then you will not be able to secure a loan for your business. If it is high, you are better placed when it comes to receiving a line of credit from a financial institution. The problem with this is that you might find partnerships or limited liability companies where one of the parties has had a bad credit score. This makes the deal sour for the business as a whole regardless of the other partners’ credit scores.
Solutions to Businesses for MSME Loans
One of the solutions to these eligibility criteria is to seek for alternative forms of borrowing. You can now opt for online business loans through Loan Frame as one of the alternatives. Another option is to get a loan from a lower financial institution whose terms are more lenient towards your business.
Getting business loans is very challenging when you are starting out and before your business can stand on its own. Loan Frame has come up with ways to overcome these hurdles so that you are able to get a line of credit from different financial institutions. MSME loans have also become slightly easier to apply for in India thanks to the policies in place by some financial companies to help young businesses gain footing.