Business Loan Approval Process – Step-by-Step Guide
1. Assess Your Loan Requirement
Determine how much money you need and what it will be used for (working capital, equipment, expansion, etc.)
Decide loan tenure and repayment capacity.
2. Check Eligibility
Review lender’s eligibility criteria such as business vintage, turnover, credit score, and documentation required.
Ensure your business meets these basic requirements.
3. Choose the Right Lender
Compare interest rates, processing fees, loan amount limits, and repayment options among banks, NBFCs, and digital lenders.
Check lender credibility and customer reviews.
4. Prepare Documentation
Common documents needed:
Business registration proof (Udyam Registration, GST certificate)
Financial statements (balance sheets, profit & loss accounts)
Bank statements (usually last 6 to 12 months)
Income tax returns
Identity and address proofs of business owner(s)
Business plan (sometimes required)
5. Apply for the Loan
Fill out the loan application form online or offline.
Submit all required documents accurately.
Some digital lenders provide instant online application and approval processes.
6. Loan Processing & Verification
The lender reviews your application and verifies documents.
They may conduct background checks and assess your creditworthiness through CIBIL or other credit bureaus.
For secured loans, lender evaluates collateral offered.
7. Loan Sanction
Once verified, the lender decides whether to approve the loan.
You receive a sanction letter detailing loan amount, interest rate, tenure, EMI, fees, and terms & conditions.
8. Loan Agreement & Documentation
Sign the loan agreement and submit any additional documentation if required.
For secured loans, collateral papers are registered.
9. Disbursal of Funds
After all formalities, the loan amount is credited to your bank account.
Disbursal time varies from a few hours (digital loans) to several days (bank loans).
10. Repayment
Start repaying EMIs as per the schedule mentioned in the loan agreement.