Business Loan Eligibility in India: Who Can Apply & How to Qualify

Every business in India needs financial support at some stage, whether it’s a small shop managing daily expenses, a startup planning growth, or an established business exploring new opportunities. Business loans act as a strong financial backbone, helping entrepreneurs turn their plans into reality. 

Yet, one question worries most business owners: “Am I eligible to get a business loan?” 

At TallyCapital, we know that loan eligibility can feel overwhelming. That’s why this blog explains business loan eligibility criteria in a clear, structured, and easy-to-follow way for Indian businesses. By the end of this blog, you’ll understand what lenders look for and how you can improve your chances of getting your business loan approved. 

What Is a Business Loan? 

A business loan is money borrowed from a bank or financial institution to meet business-related needs. Unlike personal loans, this money must be used only for business purposes. 

Indian businesses take business loans for many reasons: 

• Working capital requirements 
• Business expansion or diversification 
• Purchasing machinery or equipment 
• Managing cash flow gaps 
• Hiring staff or increasing inventory 

Business loans can be secured or unsecured. Secured loans require collateral, such as property or equipment. Unsecured loans do not need collateral but usually come with higher interest rates. 

If you are a Tally user, you already maintain sales, expenses, GST, etc , digitally. This financial discipline helps lenders trust your business more easily. 

Why Business Loan Eligibility Matters 

Eligibility is one of the most important parts of the loan process. It decides whether your loan will be approved, how much loan you will get, and at what interest rate. 

Many business owners apply for loans without checking eligibility. When the application gets rejected, it not only wastes time but can also affect their credit score. Multiple rejections can make future loan approvals difficult. 

Eligibility matters because: 

• It helps lenders assess repayment capacity 
• It reduces the risk of loan default 
• It determines interest rates and loan amount 
• It improves approval chances when criteria are met 

For example, a small retailer with steady sales and proper accounts has a higher chance of approval than a business with irregular income and missing records. 

Understanding eligibility before applying helps you apply smarter and with confidence. 

Factors Affecting Business Loan Eligibility 

Lenders evaluate your business using several factors. Let us look at the most important ones in simple terms. 

Business Vintage 

Business vintage means how long your business has been operating. Most lenders prefer businesses that have been running for at least 1 to 3 years. 

A business that has survived for a few years shows stability and experience. New businesses can still apply, but loan options may be limited or require additional guarantees. 

Annual Turnover 

Turnover shows how much revenue your business generates in a year. Lenders usually have a minimum turnover requirement. 

They are looking for: 

• Consistent sales overtime 
• Growth or stability in revenue 
• Genuine business transactions 

For example, a business with ₹25 lakhs annual turnover and proper records will find it easier to qualify than a business with high but irregular sales.  

Credit Score  

Credit score is one of the most important factors lenders consider while evaluating a business loan application. It reflects how responsibly credit has been managed in the past. Even if your business is doing well, a weak credit profile can negatively impact loan approval. 

Most lenders prefer a credit score of 650 or above. A higher score increases approval chances and can also reduce interest rates. 

Credit score evaluation is mainly divided into two parts: 

Personal Credit Score

The personal credit score reflects how well a business owner manages personal loans, credit cards, and repayments. Lenders use it to judge the owner’s financial discipline, especially for small businesses and proprietorships. 

Business Credit Score

The business credit score represents the credit history and repayment behavior of the business entity. It helps lenders assess the financial stability and reliability of the business while approving a business loan. 

Read the following blog to improve your credit score.

Business Type and Structure 

The structure of your business also matters. Lenders usually offer loans to: 

• Sole proprietors 
• Partnership firms 
• LLPs 
• Private limited companies 
• MSMEs 
• Self-employed professionals 

Registered and compliant businesses are viewed as more reliable. 

Cash Flow and Profitability 

Profit is important, but cash flow is equally critical. Lenders want to ensure that your business generates enough cash to repay EMIs regularly. 

They check: 

Monthly inflow and outflow: This shows how much money comes into your business and how much it goes out every month. 

Expense management: This refers to how well your business controls and records its regular costs and spending. 

Net profit margins: This indicates how much actual profit your business earns after all expenses are deducted from sales. 

A business may show profit but still struggle with cash flow. Proper cash flow tracking in Tally helps avoid this issue. 

Existing Loans and Liabilities 

If you already have multiple loans, lenders may worry about the repayment burden. 

That does not mean you cannot apply. It simply means your income and cash flow should comfortably support additional EMI payments. So, try to close unnecessary loans before applying for a new business loan. 

Bank Account Statements 

Bank statements are used to analyze: 

• Transaction volume: Indicates how active and stable your business operations are. 
• Average monthly balance: Reflects your ability to maintain sufficient funds in the account. 
• Financial discipline: Reveals how well you manage payments and banking behavior. 

Most lenders ask for 6–12 months of bank statements to assess overall financial health. 

Tip: Avoid cheque bounces and irregular transactions, as they can reduce your loan eligibility. 

Business Location and Industry Type 

Your business location and industry also affect eligibility. 

• Businesses in stable and growing industries are preferred 
• Certain high-risk industries may face stricter checks 
• Urban and semi-urban locations often get better access to loans 

That said, many lenders now support small businesses in tier-2 and tier-3 cities as well. 

Age of the Business Owner 

Most lenders have age criteria such as: 

• Minimum age: 21 years 
• Maximum age: 65 years 

This ensures the borrower remains actively involved in the business during the loan tenure. 

Who Can Apply for a Business Loan in India? 

Business loans in India are available to many types of applicants. Here is a clear overview: 

Documents Required for Business Loan Eligibility 

To assess eligibility, lenders usually ask for: 

• Identity proof (Aadhaar, PAN) 
• Business proof and registration documents 
• Address proof of business and owner (Utility bills, rental agreement, or registered lease) 
• Bank statements (6–12 months)  
• Income tax returns (2-3 years) 
• Financial statements (profit & loss statements, balance sheet) 
• GST returns (if applicable) 

Having all documents ready speeds up approval. 

But with TallyCapital, you won’t need all this paperwork. You can get loan offers based on your financial data already maintained in TallyPrime making the process faster, simpler, and hassle-free. 

 No repeated uploads. No chasing documents. Just quick, data-driven loan offers. 

How to Improve Your Business Loan Eligibility 

Here are some practical steps to increase your chances of approval: 

• Maintain proper financial records 
• File income tax and GST returns on time 
• Check your credit score regularly 
• Keep business bank transactions clean 
• Ensure consistent income growth 
• Avoid excessive debt 

Planning ahead makes a big difference. 

Why Choose TallyCapital for Business Loans? 

At TallyCapital, we specialize in business loans only. Our focus is to understand your business needs and offer suitable financing solutions with: 

• Simple eligibility criteria 
• Minimal documentation 
• Faster approval process 
• Flexible repayment options 
• Transparent terms 

We believe every business deserves access to the right financial support at the right time. To help you plan smarter, TallyCapital offers a free Business Loan Eligibility Checker that shows how much financing your business may qualify for based on your current financials, helping you make decisions confidently before applying for a loan. 

Final Thoughts 

Understanding business loan eligibility criteria is the first and most important step toward getting funding for your business. By knowing what lenders expect, you can prepare better, avoid rejections, and secure the funds you need to grow. 

Whether you’re looking to manage working capital, expand operations, or stabilize cash flow, a business loan can be a powerful tool when used wisely. 

If you’re planning to apply for a business loan, make sure your business is financially ready and compliant. And when you are, TallyCapital is here to support your growth journey. 

Need help knowing your business loan eligibility? Connect with TallyCapital and take the next step toward business success. 

FAQs – Business Loan Eligibility in India 

Can a new business apply for a business loan?
Yes, but options may be limited. New businesses usually need strong income proof or a co-applicant. 

What is the minimum credit score required?
Most lenders prefer a score of 650 or above. A higher score improves loan terms. 

Can I get a business loan without collateral?
Yes, unsecured business loans are available. However, interest rates may be higher. 

How much loan can I get based on turnover?
Loan amount depends on turnover, profits, and repayment capacity. Higher turnover usually allows higher loan amounts. 

Do GST returns affect eligibility?
Yes. Regular GST filing shows compliance and stable sales, which improves eligibility.