12/03/2022
How can entrepreneurs get business loans when they have limited revenue?
Overall, it is difficult for an entrepreneur with a limited income to get a loan from a bank or an NBFC. Most lending institutions have set eligibility criteria which usually includes:
The business should have a minimum turnover of Rs 10 lakhs.
The enterprise should have profits for two years
Minimum Annual Income for the business should be Rs 2 lakhs
Some lenders can extend up to Rs 50 lakhs of collateral-free loans for tenures ranging from one to five years. The above eligibility will vary across lenders.
If you do not fit the eligibility criteria, the other options open to you are:
Personal loans – Lenders do not define end-use for a personal loan. Once again, you have to meet the lender's eligibility criteria, which will include age, income, and a credit score of at least 750. The tenure for the loan ranges from one to five years, and the maximum you can get is about Rs 25 lakhs.
A loan from friends & family – You can reach out to a family or friend to help you out. If you have a profitable business, they may want to join as a silent partner, instead of extending a loan.
Apply for a GECL loan if you are a registered MSME. The Emergency Credit Line Guarantee Scheme has been launched to help MSMEs deal with working capital issues caused by the Corona Virus pandemic. It is applicable for loans from 23rd May to 31st Oct 2020 or until Rs 3 lakh crore is sanctioned, whichever comes earlier. It has a repayment tenure of 4 years and you can repay the principal amount within 36 months post the moratorium period.
Whichever option you fit into and choose, my only suggestion is to do your math. Select the option that is most profitable to you.
