A credit team reads three years of your business before it reads the reason you’re borrowing. Turnover growth, whether GST returns and ITR tell the same story, and how your current account behaves under pressure — cheque returns, days spent overdrawn, transfers that loop back to related accounts — carry more weight than the application form. We check what the lender will check, before the file goes in.
Term loan or working capital — the mismatch is the usual failure
A term loan is repaid on a fixed schedule and suits an asset that outlives the loan — machinery, a commercial vehicle, a new facility. For these, lenders generally want a debt service coverage ratio (DSCR) comfortably above 1.25–1.5x depending on the sector, meaning your cash accruals need real headroom over the proposed EMI, not just enough to cover it. Working capital facilities are revolving and sized against your operating cycle instead — receivables plus inventory, less trade creditors. Funding a 90-day receivable cycle with a 36-month term loan creates exactly the kind of monthly strain no rate negotiation fixes.
Term loans for expansion, new premises or capital expenditure
Machinery and equipment finance
Demand loans and short-term business credit
Working capital limits sized to your operating cycle
Business acquisition or partnership buyout finance (case-by-case)
Project finance for eligible larger-ticket proposals
What usually goes wrong
The most common rejection reason isn’t low turnover — it’s turnover that doesn’t reconcile. If GST returns show one figure and the ITR shows a lower one, the underwriter takes the lower number and asks why the gap exists, and a weak answer stalls the file regardless of how strong the business actually is. Unsecured business loans are also capped lower than most applicants expect — commonly in the ₹50–75 lakh range before a lender wants collateral — so a large unsecured ask often gets restructured into a smaller unsecured piece plus a secured facility rather than declined outright.
What the credit file is actually tested against
Below the surface checklist, two things decide most outcomes: business vintage — most lenders want 2–3 years minimum, longer for unsecured facilities — and bank statement conduct over the preceding 6–12 months, which is read line by line, not summarised.
Business vintage (typically 2–3 years minimum, varies by product and lender)
Annual turnover and profitability per ITR / audited accounts
Business credit history and bureau score (CIBIL / CRIF)
Bank statement conduct — cheque returns, overdrawn days, related-party transfers
Existing liabilities and debt service coverage
Collateral availability, where the facility requires it
Bharat Finsol is an independent advisory and facilitation firm and does not lend money. Approval, pricing and terms rest solely with the lender.
