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‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.
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Adarsh, a 25-year-old from Jaipur, dreamed of expanding his small stationery shop. His annual turnover was only ₹5,00,000, but he needed ₹3,00,000 to buy more stock and attract new customers. Every bank he visited rejected his loan application because of his low income.
Feeling hopeless, Adarsh met a friend who suggested improving his financial records. He started paying bills on time, kept his credit card usage below 30%, and maintained proper accounts. Slowly, his credit score improved from 580 to 680.
Next, he approached an NBFC instead of a traditional bank. They asked for his business plan and bank statements. Because Adarsh had worked on his finances, the lender agreed to give him the loan at a reasonable interest rate.
Now, Adarsh’s business is growing, and he repays his loan without stress.
Want to know how you can do the same? Read the expert tips below!
If your business turnover is low, you can still qualify for a business loan – you just need to improve your financial health. This guide will show you step-by-step how to boost your credit score, cash flow, and profit margin to increase your chances of getting loan approval.
Your credit score shows lenders how trustworthy you are as a borrower. If your personal or business credit score is low, getting a loan can be difficult.
Credit Score | Rating | Loan Approval Chances |
300–579 | Bad | Very Low |
580–619 | Poor |
The Debt-to-Income (DTI) ratio shows how much debt you have compared to your income. Lenders prefer a low DTI ratio because it shows financial stability.
Particulars | Amount (₹) |
Monthly Income | 1,00,000 |
Monthly Debt Payments | 40,000 |
DTI Ratio | 40% |
Cash flow shows how money is coming in and going out of your business. Positive cash flow helps assure lenders that you can repay the loan.
Even with low turnover, if your profit margin is good, lenders may still be interested in giving you a loan.
Particulars | Amount (₹) |
Total Revenue | 20,00,000 |
Total Expenses | 15,00,000 |
Net Profit | 5,00,000 |
If getting a loan from a traditional bank is difficult, explore other options:
Even with low turnover, if you improve your financial health, like increasing your credit score, managing debt, optimising cash flow, and boosting your profit margin, your chances of getting a business loan go up. Also, explore alternative lending options to make sure your business gets the necessary funding.
Getting a business loan can be challenging, especially when your business has low turnover. However, with careful planning and a strong presentation, you can improve your chances. Here is a simple guide to help you.
Before approaching a lender, it is essential to know:
Being clear and specific shows lenders that you have thought through your financial needs and have a plan in place.
A well-structured business plan is crucial. It should include:
Demonstrating your understanding of your business and industry can instil confidence in lenders. Consider:
Examples:
Details | Information |
Business Name | Ramesh's General Store |
Location | Mysuru, Karnataka |
Annual Turnover | ₹3,00,000 |
Monthly instalments over 2 years
Business Experience
5 years in retail
Market Understanding
Serves the local community with daily needs
Commitment
Plans to expand the product range
Difficult
620–679 | Fair | Moderate |
680–739 | Good | Good |
740–799 | Very Good | High |
800–850 | Excellent | Very high |
Profit Margin
25% |
Loan Amount Needed
₹2,00,000 |
Purpose of Loan | To purchase additional inventory |
Repayment Plan |
*T&C Apply
Details | Information |
Business Name | Priya's Kitchen Delights |
Location | Bengaluru, Karnataka |
Annual Turnover | ₹5,00,000 |
Loan Amount Needed | ₹3,00,000 |
Purpose of Loan | To upgrade kitchen equipment |
Repayment Plan | Monthly instalments over 3 years |
Business Experience | 3 Years in catering |
Market Understanding | Caters to local events and offices |
Commitment | Aims to open a small eatery in the future |
Remember, preparation and clarity are key. With a comprehensive business plan and a clear understanding of your needs, you can improve your chances of securing a business loan.
If your business has low turnover, getting a loan can be hard. But don't worry – there are ways to improve your chances.
A secured loan means you give something valuable (called collateral) to the lender, like property or equipment. If you can not repay the loan, the lender can take the collateral. Because this reduces risk for the lender, they may offer:
For example, in India, you can get a secured business loan from banks or NBFCs. You might need to show that your business has been running for at least 2 years and is making a profit. You also need to own property or equipment to use as collateral.
Item | Details |
Property Value | ₹50,00,000 |
Loan-to-Value Ratio (LTV) | 80% |
Loan Amount | ₹40,00,000 |
Interest Rate | 10% per annum |
Loan Tenure | 10 years |
Monthly EMI | ₹53,000 approx. |
In this example, by using property worth ₹50,00,000 as collateral, you can get a loan of ₹40,00,000 at a lower interest rate.
If traditional banks say no, other lenders might help:
A comprehensive business plan demonstrates your business's potential and repayment capability. Ensure your plan includes:
A well-structured business plan can instil confidence in lenders about your business's future.
Implementing accounting software like Tally or Zoho Books can streamline your financial management. Benefits include:
These tools can provide lenders with clear insights into your financial health.
Consulting with a financial advisor can help you:
Their expertise can guide you in making informed decisions and presenting a strong loan application.
Your credit score plays a crucial role in loan approval. To improve it:
A higher credit score can lead to better loan terms and increased approval chances.
If traditional loans are challenging to obtain, consider:
Peer-to-Peer Lending: Borrowing from individual investors through online platforms.
Financing Option | Example Platforms |
Microloans | Pradhan Mantri Mudra Yojana (PMMY), Rashtriya Mahila Kosh (RMK), SIDBI Microfinance Support Program |
Crowdfunding | Milaap , Fueladream , Ketto, Catapooolt |
Peer-to-Peer Lending | Faircent , Lendbox , IndiaP2P |
These alternatives can provide the necessary capital with potentially more flexible terms.
Getting a business loan with low turnover can be tough, but it is not impossible. Start by improving your finances – pay bills on time, reduce debt, and manage cash flow well. A good credit score and a simple business plan can show lenders that you are reliable.
If banks say no, try other options like secured loans, NBFCs, or peer-to-peer lending. These may have easier rules.
Keep your financial records clear and get expert advice if needed. Even with low turnover, showing that you can repay the loan and grow your business can help you get approved.
Be patient, stay focused, and explore all options. With the right steps, you can get the funds to grow your business.
1. Can I get a business loan if my turnover is low?
Yes, you can still get a loan by improving your credit score, showing strong cash flow, or offering collateral to secure the loan.
2. How can I improve my chances of loan approval?
Keep your credit score high, reduce existing debt, and prepare a clear business plan to show lenders your repayment ability.
3. What if banks reject my loan application?
You can try alternative lenders like NBFCs, P2P lending platforms, or microloan schemes that have easier approval rules.
4. Do I need collateral for a business loan?
Not always, but offering collateral (like property or equipment) can help you get bigger loans at lower interest rates.
5. How important is a business plan for a loan?
Very important – lenders check your business plan to understand your goals, revenue potential, and repayment strategy before approving a loan.
